Rollover of Distribution from ROTH IRA
I have had a ROTH IRA for many years (more than five) and have made substantial conversions of amounts from my Traditional IRA to my ROTH over the past several years, including this year. I will be needing some cash in December and would like to take a distribution from my ROTH in December and roll it back into the ROTH in January of 2022, when I will be selling some assets to generate tax. Selling assets and generating capital gain this year would result in substantially higher tax on the recognized gain than if I wait until next year when my income will be substantially lower. Can I do this or does the fact that I have converted amounts from my Traditional IRA to my ROTH this year preclude me from taking a December distribution and rolling it back into the ROTH in January of 2022?
Permalink Submitted by Alan - IRA critic on Tue, 2021-05-18 01:58
The only thing that precludes this is if you have rolled over another distribution from any of your IRAs in the 12 months priod to the Dec distribution you are planning. And of course it you do this, you will be locked out of another 60 day rollover of a distribution taken before Dec, 2022. Even though you are planning to roll back the coming distribution, you should still be sure you have your Roth IRA basis accounting up to speed if you ever take a non qualified distribution that is not rolled over.
When you take a distribution in a calendar year but do not roll it back until the following calendar year, the 1099R for the distribution will not have a matching 5498 for over a year. Therefore, it is always possible that the IRS asks you for documentation that you did in fact meet the 60 day deadline for completing the rollover.