Using 60 day Rollover funds and then undoing…

Submitted by David Carrell on Thu, 2022-12-15 05:11

I have significant funds in a TIRA. I have a need to temporarily “inflate” a cash brokerage account (different brokerage) for a short period of time (<30 days and nothing illicit). Can I do an indirect rollover, deposit those funds into cash account and then in 30 days cancel/undo the rollover?

Specific steps and questions follow
A. Contact TIRA brokerage and request a rollover (or is it a withdraw request) of $700K check made out to me
B. Deposit this check into Cash brokerage account
C. Let it sit in cash account for 30 days and then write a check and deposit back into TIRA account.

1. Do I request an indirect rollover OR a withdraw for the check made out to me? Or should check be made out to brokerage FBO me where cash account is held?
2. I am over 59 1/2, so nothing need be withheld for taxes or penalties on this check?
3. Can I just re-deposit the subsequent check from cash account back into original TIRA or does it need to go into a different TIRA? (I do have a second TIRA at the brokerage where cash account it or I could set up one at a different (3rd) brokerage)
4. Are there reporting difficulties if this series of events crosses over years? Is it better to just wait and do it all in Jan/Feb 2023?
5. Since it winds up getting undone/reversed, would this still count as the once in 12 months indirect rollover? Or does undoing it mean it never occurred?



Submitted by David Mertz on Thu, 2022-12-15 15:40

  1. You’ll simply request a distribution paid to you with no tax withholding.  It’s not a rollover until you make the subsequent rollover contribution, so, with respect to making the distribution, the fact that you intend to roll this distribution over is irrelevant.
  2. Tax withholding on an IRA distribution can always be declined.  The default if you don’t decline withholding is 10% federal tax withholding and state withholding that varies by state, so make sure that you explicitly decline withholding.
  3. The rollover can be made to any traditional IRA, including the one from which the distribution was made.
  4. There is no reporting difficulty if the rollover is completed the following year within the 60-day window.  The only issue as that, if you are subject to RMDs you must add the amount of the outstanding rollover to the previous year end balance of your IRAs in determining your IRA RMDs.  (Generally you would add it to the year-end balance of the receiving IRA, although the proposed regulations now make it so that it does not matter which traditional IRA balance is increased by the outstanding rollover.)
  5. This distribution and rollover is subject to the one-rollover-per-12-months regulation.  A rollover of a traditional IRA distribution does not erase the distribution, it simply makes the distribution nontaxable.  The distribution still occurred.  If you rolled over an earlier distribution made within the past 12 months, you are not permitted to roll over this new distribution.  Rolling over this distribution will also prohibit you from rolling over another distribution made within 12 months of this distribution.

Add new comment

Log in or register to post comments