60 day rollover
A client cashed out one of his IRA’s from one company and then opened up another IRA at a different company and rolled over the funds within 60 days. He does not know how to reflect this on his tax return since he received a 1099 reflecting the distribution. How does he prove that he put the money into his new IRA within the 60 days?
Permalink Submitted by Jose Morales on Fri, 2012-02-03 17:10
On line 11a of form 1040A you list all IRA distributions in aggregate. On line 11b of form 1040A you list the total amount from line 11a that is taxable. Some people will write “R” or “Rollover” next to the amount they list on line 11b. Since rollovers are reported on Form 5498, you will not receive this until May (if you withdrew the funds in 2011 and rolled them over in 2012 you would not receive the 5498 showing the rollover until next May). The information on the 5498 is provided to the IRS and that is how they will validate that you actually rolled over the funds.
Permalink Submitted by Jose Morales on Fri, 2012-02-03 17:16
on form 1040 it is lines 15a and 15b.
Permalink Submitted by Alan Spross on Fri, 2012-02-03 17:25
Now the client should be made aware that he cannot do another indirect rollover FROM the new IRA until 12 months have passed since the date of the distribution recently rolled over to the new IRA. It is best to transfer funds directly between trustees as such transfers are unlimited in number or time.
Permalink Submitted by Stuart Cameron on Thu, 2012-02-09 16:23
If a client takes money from his IRA and puts it back before the end of the 60 days period, is there a limit on how many time he can do this in a year?
Permalink Submitted by Alan Spross on Thu, 2012-02-09 17:17
It can only be done ONE TIME within a 12 month rolling period PER IRA ACCOUNT. This includes 60 day rollovers to other IRA accounts and also includes another IRA account that has received a 60 day rollover. The 12 month period is measured from the date of distribution, not the date the funds are rolled over.alan-oniras