The Internal Revenue Service has made it easier to take tax-free, short term loans from individual retirement accounts, says the Amherst-based accounting firm of Semanchin, Wetter & Schieb. It has always been OK to take money from your IRA once a year, as long as it was put into another IRA within 60 days after the withdrawal. This move does not incur any current tax on income in the IRA or the special 10 percent penalty tax for early withdrawals.
Now, in a private letter ruling for an individual taxpayer, the IRS has said it is OK to withdraw money from an IRA and deposit the money back into the same IRA within 60 days. It will be treated as a tax-free transaction just as if you had rolled the money over into a new IRA. This can be done once each year, with the one-year limit beginning on the day you received money withdrawn from the IRA.