How to Reverse IRA Distribution

By: D. Laverne O'Neal

You can change your mind about an IRA distribution without incurring taxes.

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Taking money out of a traditional IRA is a taxable event no matter your age or the reason for the withdrawal. However, if you change your mind, there is a way to return the money to the IRA without incurring tax liability. The Internal Revenue Service considers return of funds to the account within 60 days a tax-free rollover. Take heed, however. You can only reverse an IRA contribution once in 12 months.

Step 1

Consult your IRA statement or phone the trustee to find the exact amount of the distribution. You must return exactly what you withdrew within the 60-day window to avoid taxation.

Step 2

Find the date of the original distribution. Count the number of calendar days until you find the 60th day.

Step 3

Put the money back in the account a week before the deadline. Processing time might delay posting of your deposit. On the 61st day, taxes -- and possibly penalties -- are triggered.

Step 4

Confirm that the transaction has posted to your account by the 60th day.


  • Miss the deadline, and you'll pay income tax on the withdrawal. If you're under 59 1/2, you'll also pay a 10 percent early withdrawal penalty. The total liability could be 45 percent of the distribution amount as of tax year 2012.


About the Author

D. Laverne O'Neal, an Ivy League graduate, published her first article in 1997. A former theater, dance and music critic for such publications as the "Oakland Tribune" and Gannett Newspapers, she started her Web-writing career during the dot-com heyday. O'Neal also translates and edits French and Spanish. Her strongest interests are the performing arts, design, food, health, personal finance and personal growth.

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