Indirect Rollover Question
Hello,
I have a client that accidentally made multiple 529 contributions using the checkbook from their IRA account. We are looking at utilizing an indirect rollover as an option to put the funds back into the IRA. Because he made three separate $3,000 529 contributions, there are three separate transactions in his IRA. Will the IRS allow him to lump these together, or are you permitted to only roll back one of them? Each time we’ve done an indirect rollover in the past, there has only been one larger distribution from the account.
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2023-12-07 16:15
Only one of these distributions can be rolled back to the IRA within 60 days of that distribution. The others could be rolled into client’s qualified plan if that plan accepts IRA rollovers and the 60 days has not expired. This would eliminate tax and penalty on those other distributions. The final alternative is to convert the other contributions to a Roth IRA, which will not avoid tax but will not be subject to penalty. The reason for these alternatives is that the one rollover limit only applies to IRA to like kind IRA rollovers and the alternatives are rollovers to a different type of plan.