Early Withdrawal from IRA...Can It Be Reversed?

[Mo Sheets]

I have a client who "thought" they might need additional money and took an early withdrawal from an IRA of $5000. They are now being hit with a tax bill because of the 10% early withdrawal penalty + no tax taken out when the withdrawal occurred.

Is it possible to reverse this before 4/15/09 for their 2008 return (money taken out in 2008)? I wasn't sure if this was even possible. Anyone have any experience with this?

If they hadn't taken the money out, they wouldn't owe federal/state. Before I approach them with the suggestion to reverse their transaction, I wanted to find out if it was doable.

Thanks again!

Mo

[RLymanC]

Reverse IRA

To my knowledge there is no way to reverse an IRA withdrawal after 60 days has passes

[RitaB]

Maybe they will learn a lesson

Anyone have any experience with this?

Yeah, they are struck with the penalty. I suppose they could make a contribution by 4/15/09 to (in essence) avoid the tax. If the tax and penalty are a surprise to him, what is he doing buying the investment? People amaze me.

[ChEAr$]

the genie is out of the bottle,

and you can't put toothpaste back into the same tube.

[Mo Sheets]

They never learn.....

No, sad to say some folks just don't learn their lesson.

In this instance, they are wondering why I'm not able to get them a sizable refund like their preparer did last year (hmmm....let's see....no money withheld from their unemployment checks....no kids to deduct this year.....taking an early distribution on an IRA.....I could go on and on)....but it will be MY FAULT...never theirs. Gee, it would be nice sometime if someone called BEFORE the train wreck to see what other options are available.

Shaking head....

Mo

[RitaB]

Ain't it the truth...

Your client expects the same results with a completely different set of circumstances. Well, sure, it's all your fault, Mo!

I have a few that can't figure out why their refund isn't EXACTLY like the guy's he just met at the Barber Shop.

Had a young lady just beside herself (and peeved at me) cause she missed EIC. Had $4000 in unemployment. That's it. Got kinda testy with me: "Well, if I'd a known that, I woulda worked!" What? Am I supposed to call her during the off season and make sure she's working?

I think her attitude says a whole lot about the sense of entitlement that a lot of folks have.

[ChEAr$]

I know how you/we all feel

Just today a client asked me why they (joint return) didn't get 1200$ stimulus payment
last year like everybody else did.

Well, you can probably think about it and figure out the reason.

[Burke]

And I had a long-term client who was stunned to find out the whopping executor's fee he took (at the start of the estate administration no less) was not only taxable, but put them into a 25% tax bracket, and instead of big refunds, now big pays. All pass-thru deductions will be in the estate tax return that ends in 2009. They never call beforehand.