Indirect transfer from Roth IRA
Hello. I’d like to withdraw some money from my Roth IRA and then deposit about half of it back. I’m over 59 1/2 and will make the deposit back within 60 calendar days. My questions are (1) can the deposit be less than the full amount withdrawn and still qualify as an indirect transfer and (2) does the deposit have to be in the same Roth IRA that the funds were withdrawn from?
Thank you,
Permalink Submitted by Alan - IRA critic on Fri, 2023-11-03 14:27
First, due to the one 60 day rollover limit for 12 months, you cannot have rolled over a prior distribution made in the 12 months prior to this distribution. You can roll back any portion of your distribution you wish, but the rest will be a permanent depletion of your Roth IRA funds. The amount you return within 60 days can be deposited into any Roth account you have as a rollover contribution. It appears that your Roth IRA is qualified (age 59.5 and held 5 years), and if so you will not have to report the distribution on Form 8606, just on Form 1040 to report the gross distribution and rollover.
Permalink Submitted by Bob Dillon on Fri, 2023-11-03 14:38
Thank you Alan. Yes, I’m over 59 1/2 and the Roth has been open over 5 years. Does the financial information need to know that this is a rollover or will they just accept the funds into the Roth? I understand reporting the gross distribution on the 1040 but where is the rollover reported?
Permalink Submitted by Alan - IRA critic on Fri, 2023-11-03 14:41
The distribution and the rollover are reported on lines 4a and 4b of Form 1040, with “rollover” indicated on the line next to 4b. 4b is the taxable amount and will be 0. Be sure to tell the receiving custodian that the amount being deposited is a rollover contribution so the 5498 they will issue will be consistent with your 1040.