I plan on withdrawing $15K from my traditional IRA, held by a stockbroker, and then re-depositing the same amount back into the same account within 60 days. (I'm under 59 1/2).

If I've understood other responses to posts on this board, and correct me if I'm wrong, I can ask the broker not to withold any taxes.

I've talked with other people that have done this, and in almost all instances, even though the funds were re-deposited within 60 days, the broker issued a 1099 reporting that the funds had been (permanently) withdrawn. It then took an act of God to get the broker to correct this. I'm trying to avoid this.

Questions:

What kind of transaction(s) is this in the eyes of the IRS?

Can I request no backup witholding of taxes?

Is there any form, statement, or wording I should present to the broker when making the withdrawal request?

More importantly, when re-depositing the funds back into the same account, what should I tell the broker (in writing, of course) to let them know this is a re-deposit of a previous withdrawal? Are there any "trigger" words to use?

Can this type of transaction be done be done every calendar year, or do you have to wait at least 12 months? In other words, if I do this in August, can I do it again in January (new calendar year) or do I have to wait till next August?

As always, thanks for your responses.

Carl C

The financial institution must report the distribution , whether or not you later rollover the amount. The distribution must be reported on IRS Form 1099-R- no exceptions. You can always election to have no-withholding from an IRA distribution. This election is made on IRS form W-4P, which is incorporated in most- if not all, IRA distribution request form.

If the amount is rolled over, then the rollover contribution is reported on IRS form 5498. If the rollover is made within 60-days and otherwise meet the rollover requirements ,the transaction is not taxable. Other requirements include:
--For IRAs, the same assets that was distributed must be rolled over (for instance if you distribute cash you must rollover cash)
--You must not have rolled over a distribution from the same distributing IRA within the last twelve months

Regarding notifying the broker , an IRA distribution request form is sufficient to request the distribution and a rollover contribution form is sufficient to redeposit the amount. Be sure to include the amount in the designated rollover section of the form.


An amount that is distributed from your IRA, that you later properly rollover is not taxable to you. The amount must be reported on your tax return. There is a designated area ( I think it’s line 15a and 15b of Form 1040), where you report the amount, and indicate that it is not taxable.

This type of transaction (distribution from an IRA and rollover within 60-days) can be done once every twelve months per IRA. See this post for more information

Carl,

Understand that if you miss the 60 days for some reason, you will be taxed and penalized on the distribution. While the IRS has the power to waive the 60 day requirement and allow a late rollover, they have declined to do so in your circumstance.

So make sure you know what you are doing. Too many times an individual takes the so called 60-day loan in anticipation of money coming in (e.g. closing on sale of real property) only to have a delay force the missing of the 60 day deadline. In that case, it's too bad.

You do this at your own risk.

I second Barry's caution. We all laugh about Murphy's Law, but this is exactly the kind of transaction where an unintended delay can cause a massive problem. Mail gets lost. People get sick. Cars crash. Deals get delayed. You might want to consider using a line of credit for a short term transaction.

At a minimum, you should think about what is your back-up plan if timing becomes a problem. For example, do you have other funds, a line of credit or the resources of a relative to cover if the 60 days are about to elapse.

If you do proceed, keep a clear file on the paperwork. Questions about this transaction are likely to come up years from now when you may forget the details. Leave a track record so your accountant or spouse can answer questions.

I'm not advocating this, but in an emergency situation, could you:

1. Roll the funds back into the IRA.
2. TRANSFER the IRA to another custodian.
3. Then withdraw from the new IRA?

In other words, if you take advantage of a transfer (which I believe you can do an unlimited # of times) does this make it a "new" IRA, and therefore you can go through the whole exercise again in the same 12-month period? Or is it still considered the same IRA? I would think the former.