Deadlines are stressful, especially when it comes to taxes. Here’s one that may cause more stress than others: the 60-day deadline for keeping an IRA rollover tax-free. Why? Because missing this deadline can result in taxable income — and if you’re under age 59½, you may have to pay a penalty as well.
You can avoid deadline stress by asking your IRA trustee to make a direct transfer of your funds from one account to another. But say you have a short-term need for cash and you receive a distribution in the form of a check.
In that case, the clock starts ticking. You have 60 days to redeposit the withdrawal into the same account or a new one. Otherwise you may have to include it as income on your tax return.
Not all withdrawals are eligible for rollover. For instance, after age 70½, you’re required to take minimum distributions from your traditional IRA — and those cannot be redeposited into your account.
Two other restrictions to keep in mind: First, you can generally take advantage of the 60-day rule only once per year. The “waiting period” applies separately to each of your IRAs.
Second, you have to roll over the same property. That means if you receive cash, you need to put cash back in to qualify for tax-free treatment.
While the rules are strict, some relief is available. Give us a call if you’ve made a withdrawal from your retirement account or are planning to do so. We’re here to help.
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