IRA AND SIMPLE IRA cash out and rollback in 2020

Submitted by Constance Tammen on Mon, 2020-06-08 17:50

Mom took both a $94,000 IRA distribution AND a $94,000 SIMPLE IRA distribution the end of February 2020. Looks like she can get a loan to cover these now with the goal of removing these from her 2020 income. She was laid off from her job due to Corona reduced revenue at her job.

Can she: roll back the $94,000 IRA by July 15 2020 (1st direct rollover in 12 months) AND roll back the $94,000 SIMPLE IRA AS WELL WITH CORONA-RELATED distribution rule? Trustee-to Trustee treatment on CRD so no violation of 1 a year direct rollover? Does the $100,000 limit on CRD apply to only the SIMPLE IRA, or out of luck since combined total exceeds $100,000?

Also, can she roll both $94,000 into the IRA, instead of back into SIMPLE IRA (tougher to get done).

Thank you!

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Permalink Submitted by David Mertz on Mon, 2020-06-08 20:25

Because of the total amount, only $100,000 of these can be considered to be CRDs. Assuming that there were no other IRA distributions rolled over in the 12 months preceding the $94,000 distribution from her personal IRA, that distribution can be treated as a regular distribution, not a CRD, and rolled over by July 15, 2020 as an ordinary rollover. That would leave treating only the $94,000 distribution from the SIMPLE IRA as a CRD (which is under the $100,000 limit) and repaying that distribution within 3 years to eliminate the taxes otherwise due on that distribution. The repayment of the CRD is disregarded with respect to the one-rollover-per-12-months rule, so by treating one and not the other as a CRD both are allowed to be returned.
The CRD from the SIMPLE IRA is permitted to be repaid by repaying it to her personal IRA.