60 Day Rollover (Temporary Loan)
If some one is turning 59.5 on September 17th, 2020 and they do a 60 Day Rollover (Temporary Loan) from their IRA on July 19th, 2020 would they pay an early withdrawal penalty (10%) if they didn’t pay it back on September 18th, 2020 (60th Day)? In other words would the IRS look at September 18th, 2020 (60th Day) as the day the IRA withdrawal was considered taxable to them or would they look at the original withdrawal date of July 18th, 2020?
Permalink Submitted by David Mertz on Mon, 2020-02-03 17:50
The relevant date is the date of the distribution. If not rolled over, this distribution made before reaching age 59½ would be subject to an early-distribution penalty. Rolled over or not, the Form 1099-R will have code 1.
Permalink Submitted by Jared Houseman on Mon, 2020-02-03 18:40
So lets say they do the 60 Day Rollover from thier IRA for $5,000 on July 20th, 2020 and wait until September 20th, 2020 to pay it back. And in order to come up with the $5,000 (60 Day Rollover Amount) for September 20th, 2020 they take another $5,000 withdrawal (Not a 60 Day Rollover) on September 18th, 2020 and now this new withdrawal is after 59.5 years old so thus not subject to the 10% early withdrwal penanlty?
Permalink Submitted by Alan - IRA critic on Mon, 2020-02-03 20:27
That would work except that if the first distribution was received on 7/19, the 60 days to roll it over expires on 9/17. The second distribution would have to be distributed with enough time to complete the rollover of the first distribution by 9/17. The taxpayer would have to request the second distribution no later than 9/17 and also arrange to have the rollover contribution deposited no later than 9/17 to complete the rollover of the first distribution. In addition, the IRS intended the one rollover limitation in 12 months to stop serial loans from IRA accounts, so if the taxpayer had taken any distribution that was rolled over between 7/19/19 and 7/19/20, the distribution in July, 2020 would not be eligible for rollover at all. In other words, both the 12 month one rollover limit and the 60 day deadline to complete each allowed rollover are separate requirements that must be met.