settlement funds into IRA?

[GrayHare]

When settlement payments arrive due to an IRA investment, do I deposit that money into the IRA?

I've received a small settlement payment check arising from a class action suit against an investment that had been in my IRA. If I deposit that check into my IRA I would think the broker will send the IRS an IRA contribution form, which will cause tax issues since I'm not otherwise eligible to contribute to the IRA. OTOH if I do not deposit the check into the IRA, accounting-wise it feels like an improper early withdrawal.

 

[pb4uski]

Interesting question... since it is small I think I would cash it.... worst case you'll owe tax plus 10% but most likely nothing will come of it.

 

[kaneohe]

Schwab has always accepted these from me as rollovers or transfers. Checks have typically been written to custodian FBO my IRA. https://www.deseretnews.com/article/600126514/Deposit-settlement-check-in-your-IRA-fund.html

Transfer is better if you swing it. Rollovers have that 1 per 365 day limit.