How to Reverse an IRA Distribution

by Kimberlee Leonard ; Updated July 27, 2017

Taking out money from an individual retirement account (IRA) that you don't need or want leads to unwanted taxes and possibly penalties if you are not yet 59 1/2 years old. Under the 60-day rollover rule, you can reverse the IRA distribution to prevent the tax consequences. Reversal is not possible in all cases and is time sensitive, so the sooner you identify the problem and address, the better chance you have of rectifying it.

Step 1

Look at the date you received the check. You have 60 days from the date you received the check to re-deposit funds into a qualified IRA.

Step 2

Write a check for the exact amount of the distribution. Keep in mind that early distributions (prior to age 59 1/2) have a 20 percent federal tax withholding already applied to the check. You will need to make up this 20 percent in the check to prevent any distribution and get the withheld taxes back when you file your return.

Step 3

Mail the check to your IRA custodian or walk it into a branch office if one is convenient. Use signature guaranteed mail services or request a check receipt when giving the check to prove the date you deposited the check.

Step 4

Obtain IRS forms 1099-R and 5498 for the year the distribution and re-deposit were made. The 1099-R records the distribution while the 5498 records the re-deposit.

Step 5

Record the distribution on Line 15, Form 1040 when filing taxes. If using Form 1040A, record it on Line 11.

About the Author

With more than 15 years of professional writing experience, Kimberlee finds it fun to take technical mumbo-jumbo and make it fun! Her first career was in financial services and insurance.

Cite this Article A tool to create a citation to reference this article Cite this Article