Urgent SEP question

[Corduroy Frog]

Older, high income client was convinced the Bush Tax Cuts would never be entirely restored. So after he received his minimum required distribution for 2010, he withdrew another $200,000 so it could be taxed at 35% instead of 39.6% plus phaseouts of itmd deductions.

Having been aware of the recent extension, he went back to the broker and returned the $200,000 to his SEP. A few days later, the broker called him back and told him the custodian could not accept the $200,000 back into the SEP once it had been withdrawn.

Is this correct?? Sea-Tax, Josh and Veritas, you guys still out there??

Not sure whether he has had the money 60 days or not, but if he hasn't, can this be recharacterized as a rollover even if it is from a SEP instead of a traditional IRA?

[synergytax]

If it has been 60 days or less he'll have to do a rollover to a traditional IRA. Once you take money out of an employer sponsored plan you can't put it back. If there was any tax withholding he'll have to add that to the rollover amount.

[S T]

Pub 590- Pub 560

Ron,
Take a look at Pub 590 (I could only find 2009 version) starting on about page 25 (Employer's Plan) Pub 560 starting about page 19

I believe the same 60 day rollover provision is available as with Traditional IRA's, but there might be a few noted exceptions such as MDR amounts, non deductible contributions, etc

Sandy

[sea-tax]

Never researched this as I have never had a client who had done what your client has done.

I would agree with synergytax. If the 60 days is not up have him roll it into a IRA and report it on the 1040 as a rollover and then 18 months later IRS will send you a letter saying they want the tax on SEP distribution and you will have to write letter back saying no and hear is proof of 60 day rollover.

Also he will have to come up with any amounts withheld for taxes to complete the rollover or it will be a partial rollover and the tax withheld portion will be taxable Sep withdrawl.

[veritas]

Haven't seen this before

either.

But I would agree with Sea-Tax this could be an indirect rollover subject to the 60 day rule.

[JON]

Her is my view..

I have always been told that an SEP-IRA has always been an IRA with an amendment to allow it to recieve SEP payments. The SEP-IRA can also take regular IRA payments from the participant. I would hope the rules would be the same for SEP-IRA and IRA, I have never known them to be different. The first question would be to the custodian - Why can we not roll it back???, remembering you only get one roll a year. I hope he did not have another one. GOOD LUCK - and let us know.