60 day Indirect Rollover – Returning the funds
A question that came up today regarding 60 day indirect rollovers…
To avoid income tax and potential penalties on money withdrawn from an IRA, the account owner must return the funds withdrawn within 60 calendar days. Keep in mind this money is returning to the same IRA it was withdrawn from. The question:
When the money is returned to the account, can it be returned in increments? Say $100,000 was withdrawn, can the owner return $40,000 after 20 days and then $60,000 10 days after that? Or will the return of funds need to be done in one swoop?
Before, you could return the money in increments. A conversation with Schwab today educated me that there may have been changes to this rule implemented Q3 2018. Any of your insights would be highly appreciated.
Permalink Submitted by Alan - IRA critic on Wed, 2019-05-22 01:51
I have no idea what Schwab is referring to if the 100k distribution was done on the same day. While the number of allowed rollovers was reduced to 1 over a 12 month period a couple years back, these rollovers are counted by the distribution, not the contribution. Therefore a single distribution can be rolled over in increments as long as the entire amount is rolled over within 60 days or receipt. Conversely, two distributions cannot be consolidated into a single rollover contribution since there was more than one distribution rolled over. Is Schwab refusing to accept the second rollover contribution? If so, the discussion needs to be appealed to a higher authority at Schwab.
Permalink Submitted by Bruce Steiner on Sun, 2019-05-26 01:34
The 1 rollover in 12 months limit was in the Code for many years even if the Service often seemed unaware of it. It was originally 1 rollover in 3 years but it was changed to 1 in 12 months many years ago.