Withdrawing funds from an IRA

[Guest sgj]

Hello,

Someone told me that you can withdraw $ from an IRA for up to 60 days penalty free as long as you return the $ within 60 days.

Is this true? If so what are the requirements?

thanks in advance!

[Guest Trirod]

That is true - the main requirement is that you can only do it once per year.

Make sure everything is documented because your IRA custodian will issue you with a 1099R showing that the funds were withdrawn, so you need evidence to show they were redeposited within 60 days.

[Appleby]

The limit is actually one per 12-month period ( technically that is a year, but to be clear, the year could be fiscal or calendar).

The Custodian of the IRA to which the rollover contribution was made will issue a Form 5498 to report the contribution.

[mbozek]

I think the rule is that a taxpayer can make one rollover for each IRA no more than once every 12 months, e.g, rollover on 5/1/02

no rollover is permitted until 5/2/03. Also 12 month restriction only applies for rollover to another IRA. Participant can rollover IRA to qualfied plan within 12 months after rolling funds into IRA from another IRA.

[Appleby]

There is no limit on how may rollover contribution an IRA owner can make. There is however, a limit on how may distributions from one IRA, the IRA owner can rollover.

Example:

IRA owner takes a distribution of $10,000 from IRA number 1 on May 1, 2002. IRA owner can rollover this $10,000 to any other of his/her IRA (including the one the distribution was taken from) within 60-days. This rollover contribution does not have to be made in a lumpsum. It can be made in partial amounts, providing the total does not exceed $10,000. Only amounts rolled over within the 60-day period is an eligible rollover contribution.

…also, it is not necessary to rollover the entire amount

If this IRA owner takes any more distributions from IRA number 1 by April 30,2003, this distribution is not eligible to be rolled over.

However, if the IRA owner has another IRA, he/she may take a distribution from that IRA and roll it over within 60-days.

The limit is on the distribution side on a per account basis. I.e. only one distribution from an IRA can be rolled over within a 12-month period

You are right in saying the once per 12-month limit does not apply to direct rollovers involving qualified plans