By Andy Ives, CFP®, AIF®
Recently, I received two checks, one for all assets in a Traditional IRA and one for all assets in a Roth. Mindful of the 60-day rollover rules, I endorsed one of them to my brokerage company to complete an IRA-to-IRA transfer. When attempting to do the same with the Roth funds, I was told that this would create another rollover and run afoul of the IRS “one-every-12-months” requirement. I was under the impression that, being separate funds, that each represented different money and, therefore not be in violation. Am I right? Clock ticking. Please advise ASAP.
What you were told is correct. Had you completed both transactions, you would have violated the one-rollover-per-year rule. It does not matter that the funds came from different IRAs. The IRS looks at all of a person’s traditional IRAs and Roth IRAs as one IRA when it comes to rollovers. Unfortunately, there is no fix for this situation. Since the traditional IRA dollars have already been rolled over, and since the Roth IRA dollars have already been distributed to you, we are stuck with the Roth IRA check. It can’t be rolled over to a new Roth IRA, it can’t be rolled back to the old Roth IRA, and it can’t be rolled to a work plan, like a Roth 401(k). It pains me to say it, but this will have to remain as a full distribution of your Roth IRA.
I understand that I need not take any RMD this year in 2020. However, I took monthly distributions from Jenniferuary to May. Can I credit them to 2021?
A valiant effort, but no, the distributions you took in early 2020 cannot be credited toward 2021. You will need to start fresh next year with a new RMD amount based on the value of your account on December 31, 2020.