Missed the 60 day rollover period

Submitted by mike silvers on Mon, 2017-05-01 19:29

We missed the 60 day rollover period on a IRA deposit in 2015 and paid the tax in April 2017 as per IRS notice. . Question is regarding the amount of the disallowed rollover. It seems the amount should be withdrawn since tax was already paid on the amount. How should the amount be withdrawn as not to pay tax on it a second time. Thank you



Submitted by Alan - IRA critic on Mon, 2017-05-01 19:41

If you did the rollover in 2015, how did the IRS know you missed the 60 day deadline? Was the IRA custodian involved? Did the IRS notice request an amended 2015  return?

Submitted by mike silvers on Mon, 2017-05-01 20:27

The custodian issued a 1099 for the distribution which was not reflected on the tax return so the IRS just issued a bill for the tax on the IRA distribution per 1099.  The 60 day deadline only would come into play to dispute the IRS bill but since the deadline was missed by many months bill was not disputed and tax was paid.  IRA distribuion and incorrect rollover was around 150,000 and now we want to withdraw the 150,000 without paying a 2nd tax. Thank you

Submitted by Alan - IRA critic on Tue, 2017-05-02 01:12

  • SInce you had an excess IRA contribution at the end of 2015 and 2016, you will owe the 6% excise tax for each year on Form 5329. If you did not make either a TIRA or Roth contribution for those years, you must reduce your excess amount by your contribution limit for each year. For example, if you were eligible to make a 6500 contribution that you did not make, your 150k excess amount is reduced to 143.5 for year end 2015 and by the same amount for 2016. If so, your 18k total excise tax would be reduced by a small amount. If you were eligible for TIRA contributions (perhaps deductible, perhaps not) you would have to amend your 2015 and 2016 returns to claim the deduction, but if not deductible you could send in an 8606 for each year by itself.
  • To your question, you have an excess regular TIRA contribution to remove per Sec 408(d)(5) after the due date. That means that earnings on the excess amount stay in the TIRA, and you simply request a distribution of the remaining excess amount (150k if you cannot make those contributions, or reduced to 137k if you are age 50 and did not use up your contribution space for those years). There is no special coding on this corrective distribution and you do not mention an excess contribution when you request the distribution.
  • The 1099R for the distribution will show the full amount as taxable, but when you report it on your 2017 return you would show it as non taxable and include an explanatory statement with your return that the distribution was the removal of an excess contribution you made in 2015 by rolling over an IRA distribution after 60 days. Refer to the IRS levy of taxes on that distribution and state that you did not deduct the excess contribution made by improperly rolling the 150k over to an IRA.

Submitted by mike silvers on Thu, 2017-05-04 13:10

Thank you Alan.  I was not aware of the excise tax due. 

Add new comment

Log in or register to post comments