60-day Rollover
A client is looking for short-term financing. Can he Take distributions from his IRA account and return it within 60 days and qualify for the 60-day Rollover rule? I believe the answer is no.
A client is looking for short-term financing. Can he Take distributions from his IRA account and return it within 60 days and qualify for the 60-day Rollover rule? I believe the answer is no.
Permalink Submitted by Alan - IRA critic on Wed, 2024-05-22 19:49
The client can do this, but only one time in a 12 month period. Therefore, if client took a prior distribution within the past year and rolled any of it back, the client is not eligible to roll any of the proposed distribution back.
This 12 month limit applies to all owned IRAs, not to each IRA separately. If the client takes the distribution and then finds that they are not eligible for a rollover, there are two bailouts – best one is to be able to roll it into a qualified plan of their employer, and plan b is to convert it to Roth. Both of these bailout solutions exist between the one rollover limit only applies to IRA to like kind IRA rollovers. A conversion is therefore exempt from the limit because a Roth IRA not the same as a TIRA.
Of course, using an IRA for short term funding bears the risk that the replacement funds will not be available within 60 days. This is particularly risky when involving real estate closings.
Permalink Submitted by Lay Huang on Wed, 2024-05-22 19:54
Great, thanks a lot!
Is tax withholding necessary when taking distributions?
Permalink Submitted by Alan - IRA critic on Wed, 2024-05-22 20:36
No, it can be declined. If nothing is specified the default rate is 10%.