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Two early distributions in a year from Traditional IRA - can I use 60 day rollover for one and Roth IRA conversion for the second one?

Forum|Forum|4 years ago
November 10, 2021
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I had two early distributions (3 days apart) at the end of September for $18,000 and then $5,000 from my Traditional IRA. I was not aware of one 60 day rollover per 12 months limitation when I got those distributions and was intending to have them rolled over back to the same Traditional IRA. I just rolled over $18,000 back to the same Traditional IRA and have about couple weeks remaining until 60 day rollover window closes for the remaining $5,000.

Reading IRS webpages, Traditional to Roth IRA conversions are not bound by once-in-12-month rollover rules, but does this include a 60-day rollover? Can I do a Roth IRA conversion for the second distribution I got from Traditional IRA to avoid the 10% penalty (I'm under 59 and 1/2)? This would be an indirect (60-day) rollover as I already have the money. I could deposit $5,000 to my existing Roth IRA, but would this count as a Roth IRA conversion? If yes, when depositing should I mark it as current year contribution or as a 60-day rollover?

I'd appreciate a quick response.

Thanks,

Bidzina

Best answer by macuser_22

That is called a rollover/conversion. It is NOT a new contribution. You can do an indirect rollover/conversion as long as it is completed withing 60 days of the date of the distribution. Be sure to allow several days for posting time by yiur financial institution (many take up to 3 business days to post and that can cause you to miss the 60 day limit). Be sure that the financial institution understands that this is an indirect Roth conversion so that they report it properly. Give them the instruction in writing and keep a copy (the IRS can extend the 60 days if it was missed because of a bank error.)

macuser_22Answer

Employee

That is called a rollover/conversion. It is NOT a new contribution. You can do an indirect rollover/conversion as long as it is completed withing 60 days of the date of the distribution. Be sure to allow several days for posting time by yiur financial institution (many take up to 3 business days to post and that can cause you to miss the 60 day limit). Be sure that the financial institution understands that this is an indirect Roth conversion so that they report it properly. Give them the instruction in writing and keep a copy (the IRS can extend the 60 days if it was missed because of a bank error.)

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**