Elderly client took withdrawal from IRA instead of regular taxable account
My client, aged 80, wanted to pay off a loan that his synagogue had to a third party and replace it with a loan to him. The loan transaction was properly papered by an attorney. Unfortunately, instead of taking the money out of his regular brokerage account to pay off the loan, he took the money out of his IRA. A withdrawal was made from his IRA account in the amount of $576,000 on 10/31/2024. I did not discover this error until he sent me his tax docs that included a 1099-R showing this as a regular taxable withdrawal. Is there anything we can do at this late date to try to reverse the error?
Permalink Submitted by Alan - IRA critic on Wed, 2025-08-20 14:28
The only possible option is a late rollover under RP 2020-46, but the allowed reasons for the late rollover are limited to serious illness or death of close family member, or house damaged by a catastrophe. And even then the rollover is supposed to be completed much closer to the distribution date than 10 months.
Otherwise, he will have to pay the tax bill, and only consolation is that his 2025 and future RMDs will likely be much lower since the IRA balance has been sharply reduced.
This will also put him in the highest IRMAA bracket for 2026.