Paying back IRA withdrawals

Submitted by Michael Eastham on Wed, 2018-11-14 22:24

Ron is 62 and took several payments out of his IRA over the last 6 weeks totaling $10,000. The withdrawals were in the following amounts: $2,000; 1,500; $1,500; $3,000; $2,000. He now wants to put the full $10,000 back. Can he just deposit the full $10k back as long as he is within the 60 day window of the 1st deposit? If not, is there a way for him to put all the funds back without triggering tax? thanks



Submitted by Alan - IRA critic on Wed, 2018-11-14 23:32

  • He can only roll back one distribution for all his IRA accounts per 12 month period. Therefore, since all of the distributions are still within the 60 day rollover period, and he can only roll back one of them, he might as well select the largest (3,000) to roll back. The distribution pattern is odd because this many distributions would normally only be taken as needed, but apparently now he does not need any of them?  
  • He can still somewhat offset the loss of tax deferral by converting the others to a Roth IRA. The one rollover limit does not apply to Roth conversions. By converting he will avoid RMDs on the 7,000 that would start in 8 years and all his Roth earnings will be tax free after 5 years if this would be his first Roth.  He has already incurred the tax bill for 7000 of the 10,000, so a Roth conversion would at least provide a higher qualify tax free IRA in the future as a consolation.

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