60 day rollover

Submitted by Thomas Ferry on Tue, 2022-09-06 17:57

67 year old client took a $19k distributiion from his IRA on 7/12/22. No taxes withheld.

Then he took another $19k distribution on 8/12/22. No taxes withheld

His objective was to return all the money under the 60 day rollover provison.

On 9/1/22, he rolled/deposited $19k into his IRA.

How does he roll/deposit the next $19k again? If he can’t, how should he have transacted this? Should he have returned all $38k before 10/12/22?

Can the institution holdong the IRA cancel the $19k check that was received on 9/1, so that a check for $38k can be rolled in before 10/12/22?



Submitted by David Mertz on Tue, 2022-09-06 18:43

  • The limitation is based on the number of distributions, not the number of rollover deposits.  Only one of the distributions is permitted to be rolled over back to an IRA (and only if there was no other rollover back to an IRA in the one-year period ending on the date of the distribution that is rolled over).  The second $19k is not permitted to be rolled over.
  • The other $19k distribution could be deposited to a Roth IRA as a Roth conversion (taxable) or could be rolled over to an employer plan like a 401(k) (nontaxable), but cannot be rolled over to a traditional IRA.
  • Since the amounts are the same, it would make sense to treat the second distribution as the one rolled over on 9/1/2022 so that the last day of the current one-year limitation period would be the earlier date of 7/11/2023 rather than 8/11/2023, pertaining to any future distributions.

Submitted by Alan - IRA critic on Tue, 2022-09-06 18:44

  • He is using his IRA for temporary loans, which the IRS discourages and therefore limits such rollovers to one per 12 month period.  He cannot roll the second distribution back to a TIRA, but he could convert it by rolling it over to a Roth IRA within 60 days of receiving the second distribution. He would still owe taxes, but would have the benefit of a Roth IRA conversion and his Roth will not be subject to RMDs. Another option if he is still working and has an employer plan is to see if the employer plan would accept the rollover. The one rollover limit only applies to IRA to IRA of the same type rollovers, therefore a rollover to an employer non IRA plan is permitted if he has an employer plan that will accept the rollover. A former employer plan will generally not accept an IRA rollover.
  • If he has not cashed the second 19k check, he could return it to the IRA custodian and ask them to void the check and the distribution.  They might be willing to do that, but they do not have to. 

Submitted by Thomas Ferry on Wed, 2022-09-07 19:57

I was unaware that a Roth conversion needs to take place within 60 days of the distribution.  So to be clear, if a TIRA owner takes a distribution earlier in the calendar year, he/she doesn’t have until 12/31 of that year to convert it to a Roth IRA?

Submitted by David Mertz on Wed, 2022-09-07 20:17

Correct.  A Roth conversion consists of a distribution from the traditional IRA and a Roth conversion contribution (a taxable rollover) to the Roth IRA.  To be eligible for rollover the distribution must be rolled over by the 60th day after the date of the distribution.  (CFR 1.408A-4 Q&A-1(b)(1))

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