I see exceptions to withdrawal penalties and explanations galore, but can't find any detail on whether or not taxpayer can withdraw from traditional IRA and replace funds quickly (within 60 days) when NOT rolling over....actually borrowing funds and replacing them.
The transaction you describe is a rollover.
Hello,
So the situation I described above actually happened and the taxpayer withdrew funds from his IRA and replaced the funds on the 58th day back into the same account (institution, Schwab, advised him there were no restrictions). Schwab then issued him a 1099R showing a "Normal" distribution, Code 7 in Box 7 with the full amount showing as taxable in Box 2a. Lacerte is counting the full amount as taxable and I wonder how and where I can enter data into the program to explain what happened. Although it sounds like Schwab should not have used Code 7 in Box 7, this is what happened. Help!
Use the Indirect Rollover inputs.
Presumably Schwab will issue a 5498 showing a rollover contribution.
Essentially, yes. But, the funds must go to a different institution.
Thank you for this information. Can you please tell me where to look for these guidelines on taking $$ out and putting back (into any institution) so I will know for the future?
Thanks again.
IRC §408(d)(3), Reg §1.408-4(b), IRS Publication 590 for starters
I don't think the Code requires it be put into a different IRA account, although the distributing institution may.
No. I think there is a specific reg stating one can't borrow from an IRA. But there are no rules for an individual cashing out an IRA and reinvest it back into a new IRA 59 days later. Just remember, Uncle Sammy will collect 10% of the cash out on the 61st day .
The rollover Can go back to the same IRA account..
See the bottom page 24 in this pub: http://www.irs.gov/pub/irs-pdf...
