multiple withdrawals replaced within 60 days
Client took 3 separate distributions of $6,000 over a 4 week period for a total of $18000. He withheld taxes of $4,000, netting $14,000. Since he is still within the 60day window of the first distribution, can he put the full $18,000 back into his IRA account?
Permalink Submitted by Alan - IRA critic on Tue, 2017-11-14 18:10
Only one distribution can be rolled over for a 12 month period, so he can only roll 6,000 back assuming he did not do any other such rollovers in the 12 month period before the distribution he rolls back. However, there is also an escape hatch for the other two distributions because he is still within 60 days of those distributions. He can convert them to a Roth IRA because a conversion does not count as a rollover for purposes of the one rollover limitation. Then later on he could recharacterize those conversions back to his TIRA and avoid taxes on the conversions. Finally, in order to do the one permitted rollover and the conversions he will have to replace the amount withheld using other funds. Anyone taking distributions they expect to roll over would normally decline tax withholding on those distributions.