Periodic IRA distributions aggregated as single indirect rollover
Suppose retired client regularly takes quarterly distributions from IRA 1 and places the cash into the savings account at their local bank.
In mid-October, 2020, after three quarterly distributions for the year have been made, they decide they want to indirectly roll that money over to IRA 2. These are neither RMDs nor CRDs. These are normal plain-vanilla voluntary distributions for 2020.
My knee-jerk reaction is that the first two quarterly payments (made on April 1 and July 1) have passed their 60-day window and are no longer eligible for rollover. But I have a nagging feeling that I am overlooking something here.
Is there any way to aggregate the April 1 and July 1 payments with the October 1 payment, roll all of that money together over to IRA 2 in mid-October and fully comply with the 60-day window?
Please and thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2020-06-25 15:06
No way for that to happen. Each distribution has it’s own 60 day deadline (except for special situations) and only one such distribution can be rolled over with a 12 month period. Therefore, it is too late for the April distribution to be rolled over, and only one of the July or Oct distributions can be rolled over assuming there was no other prior rollover in the last 12 months. Perhaps STOP the quarterly distributions ASAP?
Permalink Submitted by Robert Vashko on Thu, 2020-06-25 15:22
Thanks. Yeah, that is what my brain was telling me. Not sure why I had something nagging at the back of my head. This was a hypothetical, so no real-world damage. But hypothetically speaking, at the end of the day, there would only be one 1099 generated from the losing custodian, and one 5498 from the receiving custodian. Short of an audit, is there any way the Service would or could catch this if the client chose to aggregate and roll over all three distributions?
Permalink Submitted by Alan - IRA critic on Thu, 2020-06-25 18:10
These infractions are mostly enforced at the custodian level with widely varying results. The IRS does not know distribution dates or the number of distributions If taken from a given account because they are added onto a single 1099R, so it would take an IRS audit. Audits that catch these things are often triggered by something else with respect to the return.