IRA Rollover

Question: Redepositing part of early distribution from IRA?

I withdrew money from my Rollover IRA to purchase a home early last year. Since the amount was over the $10,000 first time home buyer limit, I was told that if I returned some of the money within 60 days I wouldn’t be subject to penalties. At least that’s what I understood. I couldn’t scrounge much, but I sent back $1,000 within the 60-day time frame.

I received my 1099-R that shows the full amount of the initial withdrawal, but I have not received anything related to the redeposited funds. When I sent it back, it was acknowledged as a 60 day return, so there’s no question about the intent of the funds.

I’m trying to do some work in Turbo Tax and have not been able to determine if the returned money is considered a rollover or a contribution. Of course, if it’s a rollover then there is no penalty, but there is if it’s a contribution because it’s not earmarked as part of the original funds distribution.

Tax pros, what say you?

Answer: Returning the money is classified as a rollover.
Show the money from the 1099-R on line 15A, the money you didn’t return on 15B.

Adjust the amounts on form 5329 as well.

Authors@Google: Ramit Sethi

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