Do I have to pay taxes on an IRA distribution that is replenished within 60 days?
I am 49 and I withdrew $100,000 from my IRA on Dec 12, 2017 to fund a down payment for an apartment purchase. I am planning to return the same amount to the same IRA within 60 days (by Feb 10, 2018), with the proceeds from the sale of my current apartment. Do I have to pay any taxes and/or penalties, considering that I am crossing over two different tax years and my IRA will send me a 1099 showing the distribution (but not the replenishment)?
Also, this IRA was opened earlier in the year and funded with money from two previous 401(k) accounts (non-active, from previous employers). I understand that there is a one-per-12 month IRS rule regarding IRA rollovers. Does this apply to rollovers from 401k(s) to IRAs?
There is no tax due under normal circumstances as long as the money is 100% replaced within 60 days. The fact that it crosses over two years is irrelevant; all that matters is the 60-day time limit. When you do your taxes in March or April, you can indicate that the rollover was completed so no taxes will be do on your federal or state return.
You are correct that only one rollover is allowed per 12 months. Moving money from a 401(k) into an IRA doesn't count as a rollover, only money moved from an IRA into a non-retirement account. Be sure that after the rollover is completed, you wait at least 12 months from the first rollover before considering doing another one.
As long as you redeposit the $100,000 back into your IRA within the 60 day time period you will be in accordance with IRS rules regardless of crossing over two tax years. I usually recommend not waiting until the 11th hour but redeposit the funds a few days before to be safe.
Any rollover that has a qualified plan (eg 401k) on either end of the rollover does NOT count with respect to the one rollover limitation per IRA account. The limit only applies to IRA to IRA rollovers.
If you can replenish your IRA account within the 60 days, you won't have any tax liabilities on that transaction. However, make sure that you are certain about your date limit. If you replenish your account on day 61 by accident, you'll have to pay taxes and penalties.
The rollover from your 401k doesn't count in your 1-per-year restriction. You should be okay there.
I hope this helps.
Based upon the scenario you outlined, you will not have any tax liability, just make sure the funds are returned within or prior to the 60 day window expiring. It does not matter if it straddles two tax years, but matters when the funds are returned. Make sure it is back before the 60 days are up (this is very important and why I stress it a few times). You will receive a 1099 from the institution you withdrew the funds from and you will need to let your tax advisor know that the funds were replaced within 60 days. This will assure no tax is due.
The information you read about one rollover being permitted every 12 months is correct. As long as the money you moved from your 401(k) to your IRA was a direct rollover (meaning the 401(k) company made the check payable to the new provider on your behalf and not payable to you) you are fine and this would not count. The monies you have just taken out and are looking to replace in 60 days is considered a rollover. The funds were removed from your IRA and now you are looking to replace them. You will need to wait twelve months before thinking about doing this again. We always recommend that you consult with your tax advisor prior to making changes like this so they are aware and know about it when preparing your returns.
Best of luck!
I would write a Letter Of Instruction to your IRA custodian. Send it with your check to replenish. Keep a copy for your records.
Say something like "Please deposit this money into my IRA account number XXXXXXX. I am returning the distribution of $xxxxxx made on December 12, 2017 within a 60 day period."
Just helps to have your own record of what was done and when...
Hope that helps!