ira distribution to pay federal tax and then pay it back within 60 days
I have a situation where I have a large tax liability for 2018 and i cannot beat the underpayment penalty.
Can I take an IRA distribution with a large Federal withholding to cover my tax and then repay or payback the IRA within the sixty day rollover period. I know this was done years ago. Is it still available today.
Permalink Submitted by Alan - IRA critic on Sun, 2018-12-16 19:43
Yes, you can do that and the withholding is treated as paid equally throughout the year. However, because you are only allowed one 60 day rollover over a 12 month period, you cannot have done such a rollover in the last 12 months, and if you can do this one you will be locked out of another 60 day rollover for the next 12 months. Finally, since this will probably create an outstanding rollover at year end, if you have other distributions this year and have basis in your IRA, you will have to adjust the year end value. Further, if you are subject to RMDs you will have to adjust the year end value when determining your 2019 RMD.