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Level 1

If I took two early withdrawals from my IRA in the last 60 days, can I rollover (repay) the first one, or only the last one?

I understand that the rule is that once per year you can take an early withdrawal from your IRA and if you repay (rollover) the funds within 60 days you will not have to pay taxes or a penalty on the withdrawal.

But my question is in the details.  If I took two early withdrawals within the last 60 days, can I:
* Only repay the last withdrawal?
* Repay the withdrawal of my choice, not necessarily the last one?
* Or are all of the withdrawals within 60 days treated like one big withdrawal even though it was taken in two withdrawals, and I could repay both?
2 Replies
Level 15

If I took two early withdrawals from my IRA in the last 60 days, can I rollover (repay) the first one, or only the last one?

* Only repay the last withdrawal?  That is allowed.


* Repay the withdrawal of my choice, not necessarily the last one?  That is your choice to make.


* Or are all of the withdrawals within 60 days treated like one big withdrawal even though it was taken in two withdrawals, and I could repay both?  Each withdrawal is it's own situation ... sorry.  The new rule was to limit  tax free 60 day loans to ONE per a 365 day period. 

Level 15

If I took two early withdrawals from my IRA in the last 60 days, can I rollover (repay) the first one, or only the last one?

Presumably these are distributions from one or more traditional IRAs.  You are only permitted to roll over some or all of one of these distributions back to a traditional IRA and the choice of which one to roll over back into a traditional IRA is yours to make.

 

However, Roth conversions are not subject to the one-per-365-days rollover limitation.  You have the option within 60 days of the distribution to deposit some or all of the either or both of these distributions into a Roth IRA explicitly as a Roth conversion (not as a regular Roth IRA contribution).  If you do so, you'll still owe taxes on the conversion but will not own any early-distribution penalty.

 

Also, rollovers from a traditional IRA to a qualified retirement plan like a 401(k) are not subject to the limitation.  If you have a 401(k) or similar plan at your employer and the plan will accept before the expiration of the 60-day deadline an indirect rollover of money from the traditional IRA, that's another possibility to avoid both tax and early-distribution penalty.