IRA rollover

[taxmom34]

agree with Roberts, i had client last week, same thing happened.

[thomtax]

The $1,200 in your scenario is a distribution and is taxable and a 10% early withdrawal penalty applies if applicable.

I agree with Roberts.

LT

[Roberts]

The $1,200 in your scenario is a distribution and is taxable and a 10% early withdrawal penalty applies if applicable.

[AccTaxMan]

Please help. Your opinion is very welcome. =)

[AccTaxMan]

A taxpayer withdrew from his IRA in 2008. He did not plan to roll it over so the financial institution had already withheld federal and state income tax. They also noted it as a 'normal distribution' in the 1099-R. But the taxpayer changed his mind later and he put the exact amount of withdrawal (minus the withholding tax) back to the IRA account within 60 days.

Example: He withdrew $10,000 from his IRA in 2008. The financial institution withheld $1,000 federal tax and $200 state tax. So he received $8,800. Then he changed his mind and put the $8,800 back to the same IRA account within 60 days.

My thought is that the $8,800 that he put back to the IRA is considered a tax free rollover. But the $1,200 withholding tax, which he can get the refund when he files the 2008 tax return now, should be considered normal distribution and therefore it is taxable. Thoughts?