Age 70 IRA Rollover

Submitted by CARROLL WILLIAMS on Mon, 2016-02-29 19:31

I attempted a QCD on 4/2/15 (hoping they would again be legal). I soon learned that it could not be qualified until I was age 70.5 on 5/13/15. My brokerage allowed me to roll this distribution back by completing the 60 day rollover
{using personal funds) on 5/28/15, 15 days after I turned 70.5 On 6/1/15 I did a proper QCD to the same organization and they returned my first distribution to me. Was this all OK or was it an improper rollover contribution
and therefore needs to be removed as an excess contribution? Thank you CW



Submitted by Alan - IRA critic on Mon, 2016-02-29 23:36

The first distribution in 2015 must be applied to your RMD for the year and to the extent of the RMD it is not eligible for rollover. Obviously, it cannot be a QCD either. The second distribution qualifies as a QCD, and also for your RMD if there is any RMD left. A QCD can be either more, the same, or less than your RMD, so I cannot be more specific without knowing the amount of your RMD and each of the two distributions. But the portion of the first distribution that applied to your RMD and was not rollover eligible is treated as an excess regular contribution to the IRA and most be corrected in the same manner. You also are only allowed one rollover per 12 month period, so hopefully and portion of the rollover in excess of the RMD (if any) will not be void due to having done a prior rollover in the 12 months prior to 4/1/2015. I know this is confusing, so you may have more questions.

Submitted by CARROLL WILLIAMS on Mon, 2016-03-07 13:47

Thank you Alan for your help.  I will plan to request an excess contribution removal.  Am I correct that the amount to be removed  will be based on the gains or losses on this rollover?   I believe, since this is taxable money, I should include this amont on 1040 lines 15a  and 15b.  Seems like my 2015 end of year T IRA balance will be reduced by this amount, so I will plan to reduce the 2016 RMD.  Any errors here?  CW 

Submitted by Alan - IRA critic on Mon, 2016-03-07 15:57

  • Yes, an earnings calculation will have to be done for the excess contribution removal and you will have to explain to the custodian the reason for and amount of the excess contribution so they will agree to process and code this correctly on the 1099R. The entire process will not be costly but is a mess to report on Form 1040 and accompanying explanatory statements required to help the IRS understand what is being done.
  • The first distribution will be shown as taxable on 15a and 15b, and since there is no deduction taken for the excess contribution, the removal of the excess contribution will not be taxable except for the earnings that come out with it. These earnings will be taxable on your 2015 return because the excess contribution was made in 2015. Unfortunately, there is no exemption from determining the account balance for RMD calculation of the following year RMD for excess contributions that are removed, so you will still have to use the actual year end balance. In other words, outstanding rollovers and recharacterizations adjustments do apply to the year end balance, but an excess contribution in the IRA does not get a similar adjustment. Not only that, but the corrective distribution itself is not credited toward the RMD distribution for the year of the corrective distribution per Reg 1.408-8, Q&A 11.

Submitted by CARROLL WILLIAMS on Mon, 2016-03-07 17:05

Thank you again Alan.  You have explained this thoroughly.  The IRS and my online brokerage both said my original rollover was fine and no need to correct it.  I didn’t trust them.  How is this so easy for you?

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