What is the time limit for moving an I R A before penalties and taxes are due?

Answer 1

You have precisely 60 days to take the payout from one retirement plan (401k, Traditional IRA, Roth IRA) and put it into another before all heck breaks loose. Otherwise, depending on the type of plan and other things, the amount withdrawn may be taxable and may be subject to penalties.

There are two types of rollovers....direct and indirect.

An indirect rollover is when the IRA fiduciary (the people running your IRA) pays you the money, and then you give the money to a different IRA yourself. Since the old IRA isn't 100% sure you will rollover the money in time, they must withhold 20% (assuming it is a Traditional IRA with no basis) and give it to the IRS on your behalf (withholding). If you do this method, please do NOT forget about the 20%. You must roll over this amount too EVEN THOUGH YOU DIDN'T GET IT.

What do I mean? Let's say you have $10,000 in a Traditional IRA and you pull it out. The fiduciary will send the IRS a check for $2,000 and will send you a check for $8,000. If you simply take the $8,000 check to a different IRA and deposit it as a rollover (make sure you tell them it is a rollover and not "new" money), you will have only rolled over $8,000 of your $10,000. The other $2,000, since it didn't get rolled over, is a withdrawal. You will have to add the $2,000 to your income and pay tax on it. Plus, if you are under 59 1/2 (and if you don't qualify for the various exceptions), you will have to pay 10% penalty. If you are in the 25% tax bracket, you will end up owing the IRS $700 on this $2,000 withdrawal PLUS your retirement savings will drop by $2,000.

How do you avoid this? Take $2,000 of your own money and add it to the $8,000 check and give it to the new IRA fiduciary and tell them you are rolling over the full $10,000. What happens to the $2,000 sent to the IRS? It will appear on your tax return as withholding on the same line as normal federal withholding from your W-2. Basically, you will get it back when you file your taxes.

How do you prevent this whole fiasco? Do a DIRECT rollover. This is when the old IRA sends the money to the new IRA directly. No money is sent to the IRS...no worrying about 60 days...all is great!

Answer 2

If you withdraw funds from an IRA account and you want to roll it over into another IRA, you must do so in 60 calendar days or less. If you take the cash out, 20% will be withheld for Federal taxes and you will have to make up those funds from somewhere else, or you will owe taxes and penalties on the tax withholding amount. You would get credit for the tax withheld when you file your return.

A better way to move IRA money is to do a trustee to trustee rollover. You get your new IRA trustee to get the funds moved from your old IRA account directly into your new account without having the money pass into your possession at any time. There is no time limit when this is done and no taxes are withheld.

Answer 3

i believe it's within 30 days, you should have something rolled directly over to an Ira so there are no misunderstandings w/ the IRS. otherwise your open to "misunderstandings"