72T double payment in one year with tax witholding
I have a client that got sent his full 72t in both Jan and Feb of this year (double payment for 2015). In both cases tax was withheld for both fed and state. I was thinking we can put the money back in under 60 day rollover but still have the issue of the taxes creating a shortfall. The client does not want to pony up the full amount and wait for a refund after his taxes at the end of the year. Does anyone have any ideas of how to solve this?
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-19 20:02
If this was the custodian’s error, they should be expected to resolve it. If client is partially responsible then client must come up with the withholding on the second distribution to enable a complete roll back of the gross distribution. This assumes that he can do this rollover without violating the rollover limits. And if he can, then he has also used up his one permitted rollover for all his IRA accounts for the next 12 months. Preserving the rollover for emergency needs is recommended as the roll back opportunity illustrates. Client can stop any other withholding or quarterly estimates to the extent of the withholding already taken and would therefore not have to wait for a year for the tax refund. The roll back is the only way to prevent the plan from being busted, unless he wants to spend 10k plus legal costs for a PLR request. There have been favorable PLR rulings for so called executory errors.