IRA Rollover Option from old Trustee to new Trustee
I have a client who wants to begin taking money from his Traditional IRA and put it back into a Traditional IRA with another Trustee w/i the 60 Rollover period in order to avoid taxes. Can he take it from a IRA with one Trustee and put it back in with another Trustee and still avoid paying taxes?
Permalink Submitted by Alan Spross on Tue, 2010-10-26 23:28
Yes, the rollover can be made to a new IRA account or rolled back into the original account. One pitfall to note here is the one rollover rule per 12 month period per IRA account. Another rollover is not allowed within 12 months from either the IRA that distributed a prior rollover OR the IRA account that received such a rollover.
Unless someone actually needs to temporarily use the funds, it is always better to do a direct transfer since they are unlimited in number and it saves the one rollover for an emergency situation.
Permalink Submitted by Julie Brangenberg on Wed, 2010-10-27 21:48
Just to be clear, he can’t roll over with the Trustee it came from or went to for 12 months as opposed to once within a calendar year? For example, if he takes money from his IRA now and puts it back in before the year is up, he has to wait until next October 27 to take money from it again as opposed to being able to take money from it in January 2011?
Permalink Submitted by Alan Spross on Wed, 2010-10-27 22:57
Yes, the waiting period ignores calendar years. It is a rolling 12 month (ie. 1 year) period measured from the day the distribution is received. If a distribution is received this 10/27 and rolled back anytime within 60 days, a future distribution from that IRA cannot be rolled over unless it is received after 10/26/2011.
Permalink Submitted by Julie Brangenberg on Thu, 2010-10-28 14:52
So money can be taken out of the same IRA within 12 months, but cannot be rolled back into the same IRA within 12 months of the previous rollover? For example, take money out 10/28/10, roll back on 12/23/10, cannot roll back into the same IRA until 12/23/11?
Permalink Submitted by Alan Spross on Thu, 2010-10-28 16:21
No. If you are working with a single IRA and roll over a distribution taken 10/28/10 within 60 days, you cannot take another distribution out of that IRA that you intend to roll back prior to 10/28/2011. The applicable date to measure the 12 month period is the date you receive the distributions, NOT the date the rollover is completed.
In other words, the second distribution cannot be taken out of the IRA earlier than 12 months from the first one. The date you complete the rollovers does not matter for purposes of the waiting period, but of course must be done within 60 days which is the max period the funds can be outside the IRA and still be rolled over.
Permalink Submitted by Julie Brangenberg on Thu, 2010-10-28 18:46
If a customer and his spouse each have 2 IRA’s with different Trustees (4 accounts total), can they take distributions and use the 60 day Rollover rule for each trustee, ie: each person can do 2 distributions and 60 rollovers per calendar year?
Permalink Submitted by Alan Spross on Fri, 2010-10-29 02:29
Yes, that would work. But it would be applied over a 12 month period, not on a calendar year basis.
It would work if the funds were rolled back to the same account that distributed them. If the funds were rolled into a different account, there is a provision that the 12 month limit also applies to the IRA that receives a tax free rollover. So if you roll from A to B, within the next 12 months you cannot roll funds from B to another IRA.