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Indirect Rollover from 2 IRA's to 1 IRA

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Level 3

I have a client that withdrew his RMD from 2 IRA's in February and wants to roll them back into 1 IRA by doing an indirect rollover by writing a check.  I can't find anything that says 2 IRA's allowed into 1 IRA.

Does this qualify under the one indirect rollover rule?

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Level 15

I digress from Rick's opinion this time.  If your client received two distributions, only one would be eligible for indirect rollover.

The language in §408(d)(3)(B) is very clear that reference of this once-per-year nontaxable 60-day rollover treatment is to the distribution rather than the deposit (whether or not combined).  In other words, if your client received distributions from two separate IRAs, only one of these would be eligible for tax-free rollover.

408(d)(3)(B)Limitation.—This paragraph does not apply to any amount described in subparagraph (A)(i) received by an individual from an individual retirement account or individual retirement annuity if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from an individual retirement account or an individual retirement annuity which was not includible in his gross income because of the application of this paragraph.

 

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Still an AllStar

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Level 10

I'd love to find out I'm wrong (and it may happen that I'm retroactively wrong when the future rewrites the present as it applies to past distributions . . .) but . . .

1) I think 2 distributions means 2 rollovers in the same year which is no longer allowed.

2) Doesn't that have to be done within 60 days of February x, 2020?

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Level 3

No, there's a provision that the 60 day rollover has been extended to 7/15 if the RMD was taken out after February 1.

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Level 12

"extended to 7/15 if the RMD was taken out after February 1"

I found these articles for you. The issue of 2 RMDs, one from each different account, in the same year and unwanted RMDs:

https://www.investopedia.com/articles/retirement/03/110503.asp

https://www.kitces.com/blog/2020-rmd-waived-cares-act-irs-notice-2020-23-fix-unwanted-rmd-rollover/

I would suggest that the second RMD amount gets turned into a Roth conversion, if there is no provision for rolling it. He pays taxes either way, but that would return it to a sheltered position with tax free earnings/growth from now on, and no further RMD requirement.

 

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"Level Up" is a gaming function, not a real life function.
Highlighted
Level 15

I digress from Rick's opinion this time.  If your client received two distributions, only one would be eligible for indirect rollover.

The language in §408(d)(3)(B) is very clear that reference of this once-per-year nontaxable 60-day rollover treatment is to the distribution rather than the deposit (whether or not combined).  In other words, if your client received distributions from two separate IRAs, only one of these would be eligible for tax-free rollover.

408(d)(3)(B)Limitation.—This paragraph does not apply to any amount described in subparagraph (A)(i) received by an individual from an individual retirement account or individual retirement annuity if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in that subparagraph from an individual retirement account or an individual retirement annuity which was not includible in his gross income because of the application of this paragraph.

 

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Still an AllStar

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Level 15

@maughact @itonewbie Good News https://www.irs.gov/pub/irs-drop/n-20-51.pdf now allows a two distributions rollover and frees up the earlier beginning of year rule about rollovers. 

Thank you to Spidell for some plain English explanations https://www.caltax.com/news/flash-email/2020-46-irs-provides-rmd-rollover-extensions/

Even if you don't do California tax returns, sign up for their free news releases at https://www.caltax.com/get-more-from-spidell/

 


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Level 12

This is nice: "Notice 2020-51 also clarifies that the one rollover per 12-month period limitation does not apply to 2020 RMDs that are recontributed to retirement accounts by August 31, 2020."

I was recently trying to pull our corrected 2019 5498 forms and realized they were not created in May, as in typical years. They will be available in August, because they are available after the tax year filing that includes the amount you get to contribute for the tax year you are filing, of course. No wonder I couldn't find them.

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"Level Up" is a gaming function, not a real life function.
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