60 day rollover rule
I have a client that took a $14k IRA distribution on 1/10/2021 and another $14k distribution on 2/10/2021.
They want to replace all $28k using the 60 day rollover as funds are no longer needed.
Does the 60 day rollover rule allow them to replace all 28k in one payment back to the IRA (from both distributions) within 60 days from the first distribution on 1/10/2021?
Or does the 60 day rollover rule only allow them to just replace one distribution taken (even though both were taken within 60 days from each other)? Thus they can only put back $14k?
Permalink Submitted by Alan - IRA critic on Thu, 2021-02-11 20:41
The rollover limitation is measured by the distribution, not the rollover contribution, so only one of these distributions can be rolled back to a TIRA account. The other is taxable and subject to penalty if under 59.5. Two alternate choices are available which are better than losing 14k from client’s retirement accounts. The first is to convert the 14k that cannot be rolled back. The conversion will still be taxable, but the funds are preserved in a more beneficial type of IRA (Roth), and the penalty does not apply. The second is possible if client has a current workplace plan that accepts rollovers from IRA accounts. A rollover to a non IRA employer plan is also exempt from the one rollover limit, and rolling into the employer plan will eliminate taxation of the distribution.