Rollover

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  • #4622
    Bruce1950
    Participant

    Hello
    The current rule is one indirect rollover per individual per 12 month period for any IRA held.

    But let’s say the individual retires, takes a lump sum distribution from his 401(k) in a check made out to him. 20% is withheld by the employer and sent to the IRS, the individual within 60 days deposits the check in his TIRA along with his own personal check to cover the 20%. 6 months later the individual needs $XXX from this TIRA for temporary personal use with the plan to replace it within 60 days. Does the initial LSW count as a rollover for purposes of the < 1 rollover per 12 month period?

    I’m thinking it does even though it was not originally from an IRA

    Thanks

    BruceM

    #4623
    Alan S.
    Participant

    Hello, Bruce.

    No, the replacement of the 20% withholding is treated as a partial rollover of the 401k distribution, and there is no limit to the number of qualified plan distributions that can be rolled into an IRA. The original withholding never was deposited into the IRA, therefore the IRA 1099R will be limited to the personal needs distribution done later and replaced. The IRA one rollover per 12 month limit only applies to distributions taken from an IRA (but not converted to a Roth). Therefore, as long as there are no other IRA distributions to be rolled over within the 12 month period, this taxpayer has no issues.

    #4624
    Bruce1950
    Participant

    Yes, that does make sense. thanks again

    BruceM

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