IRA Contribution Rules After Taking RMD - Transferring Money Back Into IRA

This is actually a very important question with timing implications. What you've described is not automatically going to be treated as a rollover by the IRS. For a proper IRA-to-IRA rollover, you need to specifically designate it as such when you make the transaction. Since you took money out as a "partial distribution" and then deposited it back as a "contribution," the IRS will likely view these as two separate transactions: a taxable distribution followed by a contribution. Without earned income, you're not eligible to make contributions to a Traditional IRA, so this $675 would be considered an excess contribution subject to a 6% penalty tax each year until it's removed. You have a potential solution though: If it's been less than 60 days since you took the distribution, you can contact your IRA custodian and ask them to recharacterize the "contribution" as a "rollover" of the previous distribution. This needs to be clearly documented.

After dealing with a similar situation, I found an amazing tool that saved me tons of headache. I used taxr.ai (https://taxr.ai) to analyze my IRA distribution and contribution statements. I uploaded my statements showing the "PARTIAL DISTR NORMAL" and "CASH CONTRIBUTION CURRENT YEAR" codes, and the system immediately flagged the potential issue with my non-earned income status. Their analysis pointed out that I had a 60-day window to properly document this as a rollover rather than a new contribution, which I would have completely missed otherwise. It even generated the exact letter template I needed to send to my IRA custodian to request the proper coding of the transaction.

Just wanted to update - I decided to try taxr.ai after my complicated retirement account situation. I was about to make a similar mistake with an old 401k rollover that would have been classified as a distribution. The system identified that my 401k administrator had coded a transfer incorrectly, which would have resulted in unnecessary taxes. The document review feature found the miscoding immediately and provided a specific explanation of how it needed to be fixed. I was also able to confirm that my previous year's transactions were properly categorized, which gave me peace of mind. Definitely worth it for complicated retirement account situations like what the original poster described.

I had this exact same IRA coding issue last year! After days of trying to reach someone at my financial institution who understood the problem, I was ready to give up. Then I tried Claimyr (https://claimyr.com) to get through to the IRS to confirm the proper handling. You can see how it works here: https://youtu.be/_kiP6q8DX5c Instead of waiting on hold for hours, I got a call back from an actual IRS agent in about 30 minutes who explained that what I needed was a letter from my custodian confirming my intent to roll over the funds rather than contribute new money. The agent even explained exactly what the letter needed to contain and confirmed that as long as I was within the 60-day window, I could avoid the excess contribution penalty.

I need to admit I was wrong. After my skeptical comment, I decided to try Claimyr myself because I've been trying to resolve an issue with an incorrectly reported 1099-R for three months with no success. I was connected to an IRS agent in about 45 minutes (while I was making dinner, not sitting on hold). The agent looked up my account, confirmed that my IRA custodian had miscoded a rollover as a distribution, and walked me through exactly what documentation I needed to get from my bank to have it corrected. She even created a case note in my file so when I mail in the documentation, it will be connected to our conversation. I've been trying to get this resolved for months, and one conversation fixed it. I'm genuinely surprised this service actually delivered.

One thing nobody's mentioned yet is that you could also potentially fix this by returning the distribution under the "retirement plan contribution error" correction. If you withdraw the contributed amount (plus any earnings on that amount) before your tax filing deadline including extensions, you can avoid the 6% excess contribution penalty. Call your IRA provider and specifically ask about removing an "excess contribution" - they should have a form for this. You'll need to pay income tax on any earnings that accumulated on the $675 while it was in the account during this correction process, but it's better than ongoing penalties.

Has anyone considered that this might qualify as a 60-day indirect rollover? As long as you put the same amount back into the same or different IRA within 60 days, it should count as a rollover, not a contribution. The key is that you only get one indirect rollover per 12-month period across all your IRAs.

This is exactly the kind of situation where getting proper documentation is crucial. I went through something similar last year and learned the hard way that the IRS doesn't automatically treat same-amount transactions as rollovers just because they seem logical to us. The most important thing is to act quickly if you're still within the 60-day window. Contact your IRA custodian immediately and request that they recode the transaction from a "contribution" to a "rollover." You'll need this in writing - don't just rely on a phone conversation. Get a letter or amended statement showing the correct coding. If you're past the 60-day mark, you'll need to remove the excess contribution as others have mentioned. The key is to be proactive about this before tax season. I waited too long and ended up paying the 6% penalty for a full year before getting it sorted out. The IRS computers are very literal about these transaction codes, so make sure your paperwork tells the right story.