60 day withdraw

L1: 60 day withdrawIs it okay to withdraw money from a SEPP IRA and return it within 60 days and not have any penalty? If it”s okay how many times in a one year period can such a withdraw take place? The money would be a direct transfer to another institution and then a direct transfer back to the SEPP IRA. I see this as away to gain some additional income since the money transferred would earn interest for up to 60 days. My 1099 already has a code 1 since I use annual recalulation and forn 5329.ThanksJoe2006-10-27 20:07, By: Joe, IP: [67.169.13.239]
L2: 60 day withdrawWhat type of account does the other institution hold for you?2006-10-27 23:42, By: Alan S., IP: [24.116.66.98]

L2: 60 day withdrawThe other institution is a taxable Money Market account. From what I”ve read it seems you can do what ever you want with the Money as long as it is returned within 60 days.2006-10-28 00:13, By: Joe, IP: [67.169.13.239]

L2: 60 day withdrawIf you only are doing tranfers among the different IRA custodians then the 60 day rule should not apply because you are not taking a distrubtion (i.e. your hands never touch the money) , but moving money around to get the best return on your investments. 2006-10-28 14:19, By: dond, IP: [24.32.37.113]

L2: 60 day withdrawThe actual transactions you described do not bust your SEPP, however, there are a few potential stumbling blocks that you may have to explain:
1) This is not a non reportable IRA to IRA transfer. It is a 1099R generating IRA distribution because it was transferred to a taxable account. Therefore, you will have to report it as a distribution and rollover (rollback).
2) The above activity could cause the custodian to refuse the exception coding for the SEPP.
3) The transfer back must be classified as a rollover by the IRA custodian. If they think it”s a contribution and classify it as such you have a mess to correct and to convince the IRS it was really a rollover. Better make real sure they consider the return of the funds a rollover, NOT a contribution. Being done by transfer, you won”t be there to explain it to them at the time of deposit.
4) Being reported as a distribution and a rollover, it uses up your one permitted rollover for the account over 12 months. So you can only do this once per running 12 months. Don”t consider this a transfer that does not count even though it is mechanically handled as such. Those are only IRA to IRA direct transfers, and this is not.
In summary, you have not busted your SEPP, but you may be setting up some hurdles to convince the IRS of that. I would not recommend doing this with a SEPP IRA account, certainly not for a small amount. The risk is the same whether you transfer $100 or $100k.
2006-10-28 15:48, By: Alan S., IP: [24.116.66.98]

L2: 60 day withdrawThe money would not be moved from IRA to IRA. It would be moved to a taxable money market account where it would earn taxable interest. I would keep the interest and return the principle within 60 days. So let”s say I transfer $100K from my SEPP IRA into a taxable money market account. Within 60 days I transfer $100K back into the SEPP IRA. The $100K earns about $832 in taxable interest at 5% which I keep. So back to the original question can this be done without penalty, and how many time in a calendar year.ThanksJoe2006-10-28 15:53, By: Joe, IP: [67.169.13.239]

L2: 60 day withdrawSeems to me you will be earning $833 less the earnings you forego in your SEPP IRA, so your net gain is something less than the $833. Assuming your”re onlye earning 2-1/2 % in your SEPP IRA, you are only gaining $400 at most. Plus, you must time the transactions to stay under the 60 day window, so you”ll lose at least one day of interest or more going in and out. The $400 is taxable income, so assuming a 30% tax rate you are down to $280 after taxes. Is it worth $280 to take a chance on busting your SEPP? This doesn”t even factor into what happens if you have a flat tire or minor accident on your way to the bank on day 60 and in the excitement forget to do the rollover/return.2006-10-28 16:34, By: SPECTEC, IP: [206.113.214.147]

L2: 60 day withdrawJoe,
Note – my earlier response DID address your actual situation – a transfer from SEPP IRA to taxable account and back within 60 days.2006-10-28 17:51, By: Alan S., IP: [24.116.66.98]

L2: 60 day withdrawThanks for all the responses. It seems the risk (everything going right within 60 days, and if not busting the SEPP) for a small amount of additional income (reward) would not be worth it!Thanks AgainJoe2006-10-29 14:15, By: Joe, IP: [67.169.13.239]

L2: 60 day withdrawGood morning Joe:
I understand your intent of earning a large chunk of interest outside of the IRA, but I think the others have shown how your idea is not really that good due to the dangers of busting the SEPP. From a technical standpoint, you will not be doing a “transfer” but will in fact make a “withdrawal” from your IRA. Transfers are between IRA”s.
The forms you will complete are called “Withdrawal Forms” and not “Transfer Forms.” True that you can designate a non-IRA account to receive the withdrawal, but the tax effect is the same as if you had a check mailed to your house. Once you “receive” the withdrawal by deposit into your non-IRA account ora physical check in your hand,you can do a “60-day rollover” to return the funds to your SEPP IRA account. You can only do this once in each 365-day period with the same IRA account because it is NOT a Transfer.
Hope this helps.
Jim2006-10-30 09:46, By: Jim, IP: [70.184.2.72]