60 Day IRA Rollover
An T-IRA account owner took 3 separate withdrawals from the same IRA within 365 day period. He subsequently “paid back” each withdrawal within 60 days.
I am aware that only the first withdrawal is tax and penalty free whereas 2nd and 3rd rollover are taxable and generally subject to 10% penalty.
The custodian accedted all three rollovers.
Question
What is the process and reporting requirements to remove the 2nd and 3rd rollover?
How are earnings reported?
Thank you
Permalink Submitted by Alan - IRA critic on Mon, 2013-04-01 19:27
Too bad the custodian did not warn him about this. Enforcement of this rule is mostly done at the custodian level, and is most obvious when the rollover is made back to the same account. The corrective procedure involves treating the 2nd and 3rd rollovers as regular IRA contributions to the extent he is eligible to make a contribution and since the rollovers probably exceed that amount, the excess is treated as an excess TIRA contribution and is corrected the same way. The trick is to explain this requirement to the custodian who was not aware of the limitation in the first place. But the custodian should treat the amounts in excess to what he could have contributed as a regular contribution as excess regular contributions and calculate the earnings in the same manner. The earnings would be taxable in the year the excess contribution was made and are also subject to penalty. The amount without earnings is taxable in the year the distribution was made.
Permalink Submitted by ShipsnGiggles on Mon, 2013-04-01 20:51
Alan – Once again, you come through Thank you!