Fact pattern: Client X has a ~$100,000 RMD for 2023, of which he has completed ~$25K. Client X wants to take an additional ~$500K from his active SEP (he still works on a part-time basis and contributes a small amount each year) to fund the purchase of a home. We have made it abundantly clear to Client X that the remaining ~$75K of the RMD must be completed before a 60-day rollover can be initiated. He has not done a 60-day rollover in the previous 12 months, and we have also stressed that the 60-days is a HARD deadline to return the funds into the account. His expectation is that he will have proceeds from the sale of his house ready and available to deposit before he 60-day deadline hits.

Are there any other red flags and/or reasons as to why he couldn’t go through with this plan?

Additionally, assuming he does follow through on this, our plan would be to send the $500K to the client’s checking account via electronic ACH. For the return of the funds, we may suggest he overnight a check to the custodian. Included with the check will be a letter to the custodian explaining this was a 60-day rollover and to credit it as such, although the custodian probably will just toss the letter aside. Any recommendations on the process of actually disbursing/returning funds to ensure there is a clear path in case of an IRS audit?

Thanks in advance for all of your help!