topic My father in law miscalculated rmd, cashed out ira , creating large tax owed. Any way to fix a senior's mistake? in Retirement tax questions

My father in law miscalculated rmd, cashed out ira , creating large tax owed. Any way to fix a senior's mistake?

caluwaerts58 — Mon, 03 Jun 2019 17:21:07 GMT

Over the 60-day limit for rollover

Probably not. If he cashed out more than he needed to, h...

Opus 17 — Mon, 03 Jun 2019 17:21:08 GMT

Probably not. If he cashed out more than he needed to, he just owes the tax on it.

He may be able to contribute some of the money to a Roth IRA, since he's already paying the tax. That would allow future withdrawals to be tax-free (and future withdrawals from a Roth are not subject to the RMD.)

Or, if he just invests the money with a mutual fund or money manager, then at least in the future he will only owe tax on the gains and not the whole amount (and gains are taxed lower than ordinary income.)

@dmertz anything else?

Opus 17 — Mon, 03 Jun 2019 17:21:09 GMT

@dmertz anything else?

Must have earned income however to contribute to a Roth I...

MichaelL1 — Mon, 03 Jun 2019 17:21:10 GMT

Must have earned income however to contribute to a Roth IRA in the current year.

Generally there is no recourse to be able to roll any of...

dmertz — Mon, 03 Jun 2019 17:21:11 GMT

Generally there is no recourse to be able to roll any of this distribution back to an IRA since it has been more than 60 days since the distribution. However, if it can be established when a doctor's statement that your father was suffering from a medical condition (perhaps mental impairment) that contributed to your father making an inappropriate IRA distribution or failing to roll over an amount distributed in excess of his RMD, he could self-certify under Revenue Procedure 2016-47 that he would qualify for a waiver of the 60-day deadline; see Section 3.02(2)(f) of: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/rp-16-47.pdf">https://www.irs.gov/pub/irs-drop/rp-16-47.pdf</a>