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.

Warning

  • 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.

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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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