Question:
I was wondering if, after a person leaves employment and they are sent a required minimum distribution (RMD) from their plan (sent as a check, taxes withheld), would it be considered a rollover if the ex-employee wants to open up an IRA on her own to put the money in within the 60-day timeline to avoid the taxes?
Thank you
Steve
Question:
Good Afternoon Ed Slott and Company, LLC,
I was inquiring about a recent situation with a client that came up and if you could be of any assistance. We recently had a client pass away who was the account holder of an inherited IRA from his mother. This client died in July 2020. The deceased listed his wife as 100% primary beneficiary of his inherited IRA and she will inherit this second-generation IRA once the new account is opened.
If you or a family member encounter financial trouble, you may think that your IRA is a good resource to get you through the crisis. Be careful! While some company plans allow for loans, loans are not allowed from an IRA. To get around this rule, some taxpayers take IRA distributions to get quick cash and figure they will have resources to roll over the distributed amount within 60 days. This can be a dangerous plan as one IRA owner found out in a recent Private Letter Ruling (PLR).
A taxpayer went to IRS with the plea that the 60-day IRA rollover period came and went without activity due to her financial instability during a time of employment insecurity and other stressful experiences. What was IRS' response to the request for more time?
You can invest your IRA funds in just about anything. However, you’re not allowed to invest IRA funds in collectibles, life insurance, and S Corp stock; but other than that, almost everything else would be allowed. It’s important to understand that when we talk about investing your IRA funds, we’re talking about investments inside your IRA. Someone recently learned a hard lesson when he invested his IRA funds outside his IRA, which caused a taxable IRA distribution that the IRS wouldn’t allow him to fix.
A taxpayer we will call "Andrea" received an IRA distribution on May 10, 2012. She used the distribution and failed to put the distribution back into her IRA within the 60-day limit.Andrea filed a PLR (Private Letter Ruling 201429033) asserting that her failure to accomplish a rollover within 60 days was due to the fact that she used the amount to pay for medical expenses stemming from car accidents which occurred prior to the distribution. She did not have the amount available to deposit into her IRA until several months after the 60-day IRA rollover period
A taxpayer learned a costly lesson recently when he forgot to complete an IRA rollover within the 60-day time fame. He asked the IRS for more time to do the rollover, but they turned him down. As a result, his IRA distribution couldn’t be rolled over tax-free so that meant his IRA distribution was taxable.
The first Slott Report Mailbag of 2014 involves several topics we go into detail on at our 2-Day IRA Workshop. Spousal waivers, the 60-day IRA rollover window and required minimum distributions are the topics of the day, and our team of IRA Experts answered each below.
IRS Private Letter Ruling 201342017 is a ruling that involved a Ponzi scheme in an IRA. An IRA owner we will call "Alex" asserted that his failure to complete his IRA rollover within the 60-day rollover window was because his financial adviser engaged in a Ponzi scheme.
When you receive an IRA distribution that is payable to yourself (a rollover), you have 60 days after you receive the distribution to complete a tax-free rollover. If you don't complete the rollover within that 60-day period, the IRA distribution is not rollover eligible, which means it’s taxable to you.
