60 day ira withdrawal rule
have a client that has multiple iras, in jan 2015 she took out 30k from one and put it back within 60 days then closed it out in aug 2015 , she took another partial in aug 2015 for 275k from another ira ,she used to close on home and then put it back in 60 days , can the client pick which one she gets taxed on in 2015 ? both vendors sent her 1099s , that all where taxable income even though she put back the 275k , and will file a 5498 irs form
Permalink Submitted by Alan - IRA critic on Wed, 2016-04-20 17:41
Client is in violation of the one rollover rule once the second distribution was rolled over. Therefore, the second distribution is taxable and also an excess IRA contribution that must be removed from the IRA. It is unfortunate that this happened immediately after the IRS changed the one rollover rule to apply to all IRA accounts rather than to each IRA account. Worse yet, the IRS has no authority to waive this rule like they do for the 60 day time limit for a rollover. The two 1099R and 5498 forms the IRS will receive are certainly a red flag should the IRS properly uses their computer matching capabilities. This fact pattern appears to have been intended to meet some lender qualification requirement, and if so I wonder if the lenders are aware that people are raiding their IRAs to qualify for a loan and then roll the money back if they can………