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Is a distribution triggered by writing a check from one IRA account to another IRA account?

I have checks for a traditional IRA account at bank-A. I opened another traditional IRA account at bank-B by sending them a check from bank-A, made out to bank-B for my benefit. The way I understand this, this would be a transfer and not a roll-over and bank-A should not file a 1099-R since this is not a distribution. Further, it looks to me like I can do this same type of transaction as many times as I want since it is a transfer and not a rollover which has a one in 12-month limit.

Does this seem correct? I already did this, but I'm concerned that it could be problematic. thx for any help/suggestions!

update: I contacted both banks. bank-A coded it as a "distribution" and bank-B coded it as a "transfer". bank-A did not withhold any taxes. I think it will end up being an indirect rollover tax-wise.

piton
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I believe any withdrawal of money from an IRA or 401k would be called a distribution and would trigger a 1099-R. A distribution means that money was removed from that account, and doesn't indicate what you did with the money. Even a direct rollover of 401k to a rollover IRA (where it is done within the brokerage and you never touch the money) would be a distribution that triggers a 1099-R.

When you file your taxes, you need to indicate what you did with the distribution so that you are taxed correctly.

minou
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No sir. The "unlimited" rule only applies to electronic "IRA-IRA transfer" transactions which you do by telling your bank the details of the other IRA account and having them directly transfer the money there electronically. The transaction is coded in the system as a transfer in all respects, and is entirely "hands-off" on your part.

If they gave you a "checkbook" that lets you "write checks out of your IRA", that's like giving you a stick of dynamite and telling you it's a candle. What is wrong with their brain?

Yes, the fact that it was written out as a check means it will be treated as a distribution (cash-out). You will need to bend over backwards to prove that you did in fact roll it over into another IRA account within 60 days. And you can only do that once per year. Consult with a tax advisor on how exactly to assure both banks mark it as a rollover, and justify that to IRS. If you don't do this right, then yeah, it's a distribution.

If you did two of them inside 365 days, you have lost them all except the largest. Try to salvage that one. Stop using this transfer technique.

Also, if you recently bought your first house, you may be able to characterize up to $10,000 of this as a house-purchase expense, and this will exempt you from the penalty.

Harper - Reinstate Monica
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