60 day Rollover options, from several distributions

Submitted by Matt Mason on Thu, 2018-12-06 15:39

Scenario:

If several IRA distributions were made, can one 60 day rollover be combined to put back into the IRA and if so does it have to go back into the same account if came out of?

example:
IRA(1) $25,000.00 distribution Nov 15
IRA(2) $25,000.00 distribution Nov 16
IRA(3) $25,000.00 distribution Nov 22

Assuming they have not done a 60-day rollover previously in the last 365 days and are eligible to currently,
(1) how much could they put back into an IRA? The full $75,000.00 or just the last $25,000.00?
(2) Does the money have to go back into any specific IRA? I think the answer to this one is it could be put back in as a Rollover into any IRA or a new one even.

Thanks
Matt



Submitted by Alan - IRA critic on Thu, 2018-12-06 16:31

  • They can only roll back 25,000 since only one such rollover is allowed. If they were not the same amount and this mistake was made, the highest distribution would be the one rolled back. The one rollover per 12 month limit is measured by the distribution, not by the rollover contribution. The distribution rolled back can go back to the same account or to a new or other existing IRA account.
  • There is an option to reduce the damage here somewhat. The one rollover limit does not apply to Roth conversions. Therefore, the 2 distributions that cannot be rolled to a TIRA can still be converted to a Roth IRA. Ordinary taxes will be due whether the conversion is done or not, but the 10% penalty will be eliminated by conversions, the money will still be in an IRA (Roth), which is worth more than a non Roth IRA since it will eventually be tax free. Note that if converted to a Roth IRA, the conversion must not be withdrawn for 5 years or that penalty which was avoided will be due.  Congress did not conversions done to get around the penalty if the taxpayer actually desired a distribution in the end. 

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