IRA Rules - Part 7

Ira 60 Day Rule

March 5th, 2011

ira 60 day rule
Question: Can someone please explain this detail of the 60-Day IRA Rollover rule?

I am under age 59 1/2.

I want to take an amount of cash from my IRA and do a “rollover” into another IRA. I understand that if I take a cash distribution I am subject to current taxes and a 10% penalty if I do not complete this rollover within 60 days. My question is this –

If I take the distribution in December, then complete the rollover (re-deposit the money) in January, what is my tax liability? This transaction will have taken place over two tax years; I will have to report the distribution on my 2011 1040, but I will not be able to report the rollover until 2012. How will this be handled?

If you do answer this and do give an opinion, I’d be grateful if you could link to the IRS ruling or some article that explains it to me.

Thanks

Answer: If you do a rollover, make sure you don’t leave your fingerprints on the money. Have a trustee to trustee transfer and you won’t have to worry about taxes on it until you start spending it.