Traditional IRA withdrawal

[mooretax]

Taxpayer wants to withdraw some money from his traditional IRA and he will return it
within 60 days. IRS says it will be a tax-free withdrawal within 60 days in a year.

Taxpayer already withdrew some amount. He needs more money and wants to withdraw
a second time. Can he withdraw several times within 60 days and repay the full amount
within 60 days? Is it still considered a tax-free withdrawal?

[TAXNJ]

New

Taxpayer wants to withdraw some money from his traditional IRA and he will return it
within 60 days. IRS says it will be a tax-free withdrawal within 60 days in a year.

Taxpayer already withdrew some amount. He needs more money and wants to withdraw
a second time. Can he withdraw several times within 60 days and repay the full amount
within 60 days? Is it still considered a tax-free withdrawal?

New rules on how and how many. Good info on IRS website if interested in knowing

[Roland Slugg]

I will try to post a reply that is actually helpful.

A taxpayer may make one tax-free IRA rollover in any 12-month period. As long as both distributions (or all if more than two) are returned to the same or a different IRA in a single deposit and within 60 days from the date of the earliest distribution, he will meet the requirement, provided that he hasn't already done another rollover this year. Keep in mind that "60 days" is not the same as "2 months," so days must be counted accurately.

Here's an example: Taxpayer withdrew $100,000 from his IRA on October 9, 2015, and plans to withdraw another $75,000 from his IRA on November 12, 2015. In order to make the 60-day time limit and incur no tax on either distribution, he must deposit $175,000 back into the same IRA (or a different one, if he has several) no later than December 8, 2015, and he must do so via a single deposit for the entire $175,000. If he deposits, say, $125,000 on December 7th and the remaining $50,000 the very next day, he has made two rollovers, and the second one will not qualify, resulting in taxable income of $50,000. That $50,000 will also be subject to the 10% early distribution penalty if the taxpayer is under 59½ years of age.

What you have described is a high-risk "gamble." Whatever advice you give about this should be in writing.

[TAXNJ]

IRS site

SLUGG is this actually helpful also to the post

from IRS web-site (partial):

IRA One-Rollover-Per-Year Rule

Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.
•Trustee-to-trustee transfers between IRAs are not limited
•Rollovers from traditional to Roth IRAs ("conversions") are not limited

Transition rule ignores some 2014 distributions

IRA distributions rolled over to another (or the same) IRA in 2014 will not prevent a 2015 distribution from being rolled over provided the 2015 distribution is from a different IRA involved in the 2014 rollover.

[AZ-Tax]

Hight Risk is an understatement

TAXNJ said - What you have described is a high-risk "gamble." Whatever advice you give about this should be in writing.

About a year ago a client of mine that I had for 6 years for which I thought we had a good business relationship and considered him mostly honest, wanted to cash out his IRA (age 45) to pay off his mortgage. I ran the numbers and discouraged my client from taking a distribution especially at the low mortgage interest environment. My client took the distribution anyway and THANKFULLY all communication with my client was in email because my client came after me and didn't remember the email.

[TAXNJ]

Thanks but

TAXNJ said - What you have described is a high-risk "gamble." Whatever advice you give about this should be in writing.

About a year ago a client of mine that I had for 6 years for which I thought we had a good business relationship and considered him mostly honest, wanted to cash out his IRA (age 45) to pay off his mortgage. I ran the numbers and discouraged my client from taking a distribution especially at the low mortgage interest environment. My client took the distribution anyway and THANKFULLY all communication with my client was in email because my client came after me and didn't remember the email.

Thanks but that was Slugg who said that in the helpful reply post. Don't want to get credit for Slugg's reply post.