60 Day Rollover Question
Client initially rolled 401k into an IRA several years ago. Account titled IRA, NOT a Rollover IRA. Client recently took distribution with intent to pay back with in 60 days. Due to type of product, initial IRA custodian would not accept money back into IRA within 60 days. Client opened another IRA at another custodian and deposited amount back into new IRA within the 60 days. New custodian has new IRA also titled as just IRA also, not Rollover IRA. However, I notice on transaction confirmation that new custodian lists the “redeposit” as Rollover Contribution”. It obviously is not a regular IRA contribution. But will this cause a problem for the client? Also, how will client show when filing taxes that the 60 day rollover was completed? Is there a place on tax form to show the initial distribution, which he will receive a 1099 for, was reinvested? Client has confirmation of when he received funds and confirmation of when reinvested. Tks.
Permalink Submitted by Jose Morales on Wed, 2015-06-10 17:31
The vesting including the work “rollover” or not will have no impact on anything described above. In the past it was included to identify an IRA in which only funds rolled over from an employer sponsored plan were included, so as to maintain the ability to eventually roll the money back into an employer sponsored plan. Changes in the regulations no longer make this requirement necessary (although individual plans may still restrict the rollover of funds into a plan to those that have not been commingled with non-employer plan money). If the client was never going to roll these funds back into an employer sponsored plan then even that is not a concern. The word “rollover” to describe the transaction is correct. Your client will receive a 1099-R reporting the withdrawal of funds from an IRA. They will also receive a 5498 showing the amount rolled over. These two should offset. Typically you do not receive your 5498 until after tax filing, but this is still not a problem. You report the rollover by including the amount withdrawn when listing distributions from retirement/pension plans on the tax forms, then on the next line you list how much of that distribution is taxable. If the full amount was rolled over you list ‘0’ and if filing by paper some people write ‘rollover’ or ‘R’ next to this line item.
Permalink Submitted by Eduardo Arenas on Wed, 2015-07-01 19:39
The client has a simple IRA. He took $25,000 and re-deposit the money within 60 days. Now he needs $50,000 and plan to re-deposit within 60 days. Can he do that transaction in the same year? please advise.
Permalink Submitted by Alan - IRA critic on Wed, 2015-07-01 20:49
No. Assuming that the SIMPLE IRA has passed the 2 year waiting period, there is still only one rollover allowed for all of client’s IRAs for a running 12 month period. Therefore, if the first distribution took place last December, he still could not do another rollover for 12 months even though the calendar year has changed. The purpose for the recent rollover rule change is that the IRS does not want IRAs to be used for temporary loans.