Multiple IRA Distributions and 60 day rollover
If IRA distributions are taken out in several disbursements (say over the course of a couple weeks) and put back in as one lump sum, would this qualify for the once a year 60 day rollover.
For example let’s say a person takes out 10k in week 1, then 10k in week 2, then a few weeks later puts 20k back in, would that qualify for the once a year 60 day rollover?
Permalink Submitted by Alan - IRA critic on Fri, 2021-09-10 20:51
No, it would not qualify, because the one rollover limitation is measured by the distribution and there was more than one distribution here. Conversely, if the person were to have taken just one distribution, they could have rolled it back in pieces on different dates and would be OK, since there was only one distribution. Therefore, a person needing funds that does not know exactly how much, should take out a large enough sum to cover the maximum possible need, since they can always roll the excess back, and in portions if necessary.
In your case, only 10k is eligible for rollover. The additional amount creates an excess contribution, which must be withdrawn from the IRA. If still within 60 days, the person could then convert that second 10k to Roth because conversions are exempt from the rollover limitation. Taxes would still be owed for the conversion, but no penalty, and taxpayer would still have 20k in an IRA with 10k of it in a more valuable type of IRA (Roth). This partly offsets the damage from having violated the rollover limit.