Current year distribution to fund prior year contribution

Submitted by Matt Horne on Sat, 2015-02-07 20:43

Are there any IRA rules that would prohibit an individual (>59.5, <70.5) from taking an IRA distribution between Jan.1-Apr.15 and using the proceeds to make a prior year IRA contribution, assuming the person qualified to make a deductible prior year contribution?
Cash-strapped individual who has an existing IRA and whose projected current year AGI will be significantly lower than the prior year AGI..

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Permalink Submitted by Alan - IRA critic on Sat, 2015-02-07 23:44

This can be done. Of course, the individual must have the earned income to justify a 2014 IRA contribution. Of course, there is no rollover here unless the individual is also able to replace the distribution within 60 days and would have to come up with that money from other income. Essentially, what you ask about will reduce taxable income for 2014 and increase it for 2015. Note that any Savers credit the individial receives will be impaired for 3 years by taking this distribution.