Taxability of IRA

[BillV]

Explain the difference between a "rollover" and "transferred" and the tax consequence of each. Thanks!

[solomon]

See Pub. 590.

[BOB W]

Explain the difference between a "rollover" and "transferred" and the tax consequence of each. Thanks!

Rollover is moving from one IRA to another IRA, in concept. Transfer is how it is done. One type of transfer is Institution to Institution ( Direct Transfer). Another is, an Institution issues check to taxpayer and taxpayer deposits that check into another Institution's IRA account, Indirect Transfer (60 day limit to complete). A third type of transfer is taxpayer gets check and deposits it in personal account. He then waits 59 days and puts the money back into another IRA account. All are Rollovers.

The tax consequences to a rollover are the same, NONE

[appelman]

Another hazard with an indirect transfer.

There will usually be withholding. If the taxpayer does not make up the withholding from another source when depositing the transferred amount, the shortfall will be treated as a taxable withdrawal, possibly subject to penalties.