Harry Gross: How to return IRA $ with no tax penalty

Dear Harry:

I just learned that I didn't have to take the "required" money out of my IRA this year. However, I got a payment at the end of January, April, July and October. There has to be some way I can give the money back to the custodian, but everyone says that all I can do is return the last payment since it is less than 60 days old. I want to take advantage of this onetime elimination of the required distribution rules. I'm turning to you in desperation.

What Harry says: There are two rules that govern a return of the money without adverse tax consequences. One says that you may return the money by Nov. 30 or 60 days from the date of the withdrawal if that's later. And there's another rule that says you can only do this with one distribution. That would leave you with only the October withdrawal eligible for return. There is a way out, however, but it requires a little maneuvering. Put the full amount of the withdrawals into a Roth IRA. Then you have until next Oct. 15 to "recharacterize" it back into the original IRA. Do it early in the year as a precaution. You might want to consider leaving it in that Roth IRA. This will require you to pay the tax on this year's return. However, the bite is the same as if you just took the money, and there are numerous advantages to rolling over to a Roth IRA.

Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130. Harry urges all his readers to give blood - contact the American Red Cross at 800-GIVE LIFE.