Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

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CULater
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Joined: Sun Nov 13, 2016 10:59 am

Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

Post by CULater » Tue Sep 18, 2018 4:24 pm

Just wanted to check with the experts here. Is it correct that I can take a distribution from either my TIRA or Roth IRA and have 60 days to return the amount withdrawn back to my TIRA or Roth and not pay tax on the reversed withdrawal? What are the rules regarding this? I need to basically "lend" myself a sum of money for up to 60 days and then "repay" myself without incurring any taxes. I thought that I might be able to do this by taking the money from either my TIRA or Roth and putting the money back in within 60 days. Does this all have to happen within the same calendar year?
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

ResearchMed
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Re: Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

Post by ResearchMed » Tue Sep 18, 2018 5:15 pm

CULater wrote:
Tue Sep 18, 2018 4:24 pm
Just wanted to check with the experts here. Is it correct that I can take a distribution from either my TIRA or Roth IRA and have 60 days to return the amount withdrawn back to my TIRA or Roth and not pay tax on the reversed withdrawal? What are the rules regarding this? I need to basically "lend" myself a sum of money for up to 60 days and then "repay" myself without incurring any taxes. I thought that I might be able to do this by taking the money from either my TIRA or Roth and putting the money back in within 60 days. Does this all have to happen within the same calendar year?
I only know about the IRA.

Yes, one can remove money, not pay taxes, and put it back in the same or different IRA within 60 days. But do NOT miss the deadline; aim for 55 days :wink:

It doesn't need to be in the same calendar year. It's the "60 day clock" that counts.

You can do this ONE TIME ONLY for each 12-month period, regardless of whether it's the same or different IRA.
(This changed a few years ago; it used to be once per year per IRA...)

RM
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TropikThunder
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Re: Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

Post by TropikThunder » Tue Sep 18, 2018 9:38 pm

CULater wrote:
Tue Sep 18, 2018 4:24 pm
Just wanted to check with the experts here. Is it correct that I can take a distribution from either my TIRA or Roth IRA and have 60 days to return the amount withdrawn back to my TIRA or Roth and not pay tax on the reversed withdrawal? What are the rules regarding this? I need to basically "lend" myself a sum of money for up to 60 days and then "repay" myself without incurring any taxes. I thought that I might be able to do this by taking the money from either my TIRA or Roth and putting the money back in within 60 days. Does this all have to happen within the same calendar year?
Well, you wouldn't pay taxes on the Roth anyway (since that's the whole point of a Roth, taxed on the way in and not on the way out). What you're proposing is an indirect rollover, where the originating custodian sends you a check for the amount you are withdrawing and you then have 60 days to get it into another IRA or other qualified retirement plan (like how some 401k's allow incoming rollovers). If not reinvested within 60 days, it counts as a completed distribution (and is taxed if from a traditional IRA, and subject to penalties if under 59 1/2). The IRS rules do allow you to put the money back where it came from, since it's not uncommon for people to change their minds.

That said, I'm sure others will chime in with how this is a really bad way to loan yourself some money. 60 days of interest on a personal loan is much better than taking a chance on the re-deposit catching a snag and making you miss the deadline.

clydewolf
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Re: Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

Post by clydewolf » Wed Sep 19, 2018 2:14 pm

That 60 days is a hard and fast rule of 60 calendar days.
Includes Saturdays Sundays and Holidays.

Alan S.
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Re: Can I reverse a TIRA/Roth IRA distribution and not pay taxes?

Post by Alan S. » Wed Sep 19, 2018 8:08 pm

clydewolf wrote:
Wed Sep 19, 2018 2:14 pm
That 60 days is a hard and fast rule of 60 calendar days.
Includes Saturdays Sundays and Holidays.

Except the last such day. Sec 7503 applies to this. Eg. 60th day is on Saturday. You have until the following Monday unless Monday is a Holiday, then Tuesday.

https://www.law.cornell.edu/uscode/text/26/7503

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