Couple of IRA rollover questions

Submitted by Deena Wagner on Tue, 2016-12-06 02:48

1) I a distribution is taken from a TIRA in December and reinvested back into the same TIRA in February (staying within the 60 day rollover timeframe) does this meet the requirement? In other words does the set of transactions have to be within the same year, or can it span two years if it is still within a 60 day period?

2) If a distribution is taken from a TIRA by someone who is less than 59 1/2, and the entire amount is rolled over into the same account within 60, is there any 10% penalty or other tax considerations due to the owners age.

3) Given that all other requirements of the 60 day rollover rules are met, can the distribution be from a Roth IRA be rolled back into the same (or another) Roth IRA without any tax, penalties, or other considerations?



Submitted by Alan - IRA critic on Tue, 2016-12-06 03:26

  1. As long as the funds are back in an IRA account within 60 days, it does not matter if that period spans two different calendar years.
  2. There is never a tax or penalty if the rollover is completed within 60 days. But if it is not rolled over, the taxpayer owes both tax plus the penalty if under 59.5 at the time of the distribution.
  3. A Roth IRA distribution can also be rolled into a Roth IRA without tax or penalty within 60 days. Even if not rolled back in time, there may be no tax or penalty under the Roth ordering rules, for example if the distribution was composed of regular Roth contributions. Remember that only one 60 day rollover is allowed for all IRAs including TIRA and Roth within a 12 month period measured from the date of the distribution. Therefore, it is best to move money by direct transfer. These are unlimited and do not even have to be reported.

Submitted by Ben Meyer on Tue, 2016-12-06 14:13

In the case (3) for the Roth distribution and re-deposit to a Roth IRA, can withholdings be taken from the distribution, and then be replaced with other funds of the taxpayer when the deposit is made?

Submitted by Deena Wagner on Tue, 2016-12-06 16:12

Thanks for the quick reply.  I now have a solution for a short term loan to a friend.  No tax or penalty problems.

Submitted by Alan - IRA critic on Tue, 2016-12-06 17:28

Benn, withholding from a Roth IRA distribution can be taken upon request. In addition if the Roth custodian does not reasonably believe that the distribution is non taxable, they will apply the TIRA withholding rules at a 10% default rate. Either way, if withholding is taken on the distribution the taxpayer can replace the withheld amount from other money to complete a full rollover.

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