Early Withdrawl IRA?

Question

I withdrew everything early from my IRA earlier this year. I now have the money to put back into it and I was wondering if I deposit it before the end of the year can I avoid the tax penalty or early withdrawl penalty?

So I did sort of buy a home. I am on the title but not the loan. Would that count at all towards avoiding the penalty. I did contribute a little money towards it.

Answer 1

The period to reinvest without penalty is within sixty (60) days from the date of disbursement. If that number of days has passed you will not be able to reinvest to avoid the penalty.

Answer 2

If it's been more than 60 days since you took the distribution, there's no way to put it back and avoid the tax bite. Rollover distributions MUST be completed within 60 days and MUST include the amounts withheld for taxes as well.

If it's been more than 60 days you can make a maximum contribution for the year from those funds and repeat that next year until all of the money is back in the IRA.

Assuming that it's been more than 60 days you must pay the tax on the distribution as ordinary income. If you are under age 59 1/2 then there is an additional 10% penalty tax unless the money was removed for one of a few limited reasons such as to pay medical expenses that exceeded 7.5% of your AGI, the purchase of a first home, or total and permanent disability.

Answer 3

That depends on how long it's been. If you are still within the 60 days allowed, then you can put it back in, and there won't be a penalty. If it's over that, you can't put it back in - and will have to pay the 10% penalty plus the tax on the amount withdrawn if it was a traditional IRA.

Depending on your reason for withdrawing it, you might be able to avoid the penalty.

Answer 4

If you had put money into your IRA in 2007, you could replace that money. If you had not put any money into your IRA in 2007, but you had compensation, you could contribute to your IRA and take a deduction (for a traditional IRA). Other than that, your distribution is subject to income tax.

For the 10% penalty, have someone review the exceptions with you to see if you can eliminate some or all of it. If you put money toward the purchase of your home, up to $10,000 of that money is not subject to penalty. If you were unemployed you may be able to eliminate the penalty on health insurance premiums you paid. If you had medical expenses, you may be able to reduce your penalty.

Answer 5

In some case there is no penalty on early withdrawals. It includes distributions to buy, build, or rebuild a first home.