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I've seen many people on this site mention being able to use the 60 days allowed to move funds from one IRA account into another as a vehicle for a short-term loan. What do I need to know and beware of to do this? Specifically

  1. Are there any taxes/penalties if paid back within the time period?
  2. When does the 60 days start/end?
  3. Do I need to actually move the money into a new account or can I just move it and add it back into the same account?
  4. Are there any special forms I'll need to fill out when it comes time to file my taxes?
  5. Will it affect the limit to how much I can add to my IRAs this year?

The money will come from a Rollover IRA account at Vanguard if that matters. I could pull it from a Roth IRA instead but I think that has disadvantages related to item #5.

  • Why don't you look at Vanguard's web site to see how they handle the matter? Or call them and ask. – Dilip Sarwate Sep 6 '12 at 2:25
  • They might know what they will do on their end but they probably won't be as knowledgeable about what I need to watch out for. – Bryan Anderson Sep 6 '12 at 6:09
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  1. No, that's the idea behind the 60 day rule.
  2. The 60 days is from the day of withdrawal to day of deposit. I'd suggest you go 59, and not risk some odd personal situation cause you to miss the date.
  3. It can go into the account it came from. Then, it/both accounts can't be touched for a year.
  4. Yes. I am away, and at the moment can't tell you the exact form. I'd invite one of my collegues to edit this line.
  5. No, this is unrelated.

As I commented, there's confusion on withholding. The 20% pertains to 401(k) accounts, not IRAs.

  • 1
    It is worth emphasizing that the date of withdrawal is the date the withdrawal is recorded on the books of the first custodian and the date of deposit is the date that the deposit is recorded on the books of the second custodian. A FedEx receipt showing that the check was delivered to the second custodian on or before the end of the 60 day period does not count; it is the date that the money was deposited into the receiving IRA account that matters. – Dilip Sarwate Feb 5 '14 at 14:30
  • 4. you must indicate to the custodian when you make the deposit it is rollover money (and not subject to the annual limit); they may or may not use a special form. You do not include any special form with your tax return, you merely include the amount in 4a but exclude it from 4b and mark 'Rollover'. (Before 2018 these were 15a and 15b.) The custodian does break it out in box 2 of 5498 they file and send to you. – dave_thompson_085 Aug 4 at 22:56
  • Dave, ok to edit that section. I invited members to do so, nearly 7 years ago. Never too late. – JoeTaxpayer Aug 4 at 22:58
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3) It looks like you can reinvest it in the same IRA account.

Based on IRS publication 590 https://www.irs.gov/forms-pubs/about-publication-590-a

You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA.

Historical publications reflect this same wording:

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