Beware of this trap if you plan to use IRA funds for short-term cash needs: The money must be returned within 60 days or the distribution is taxed, and a 10% early payout penalty is added on if you haven’t yet reached age 59½. This case shows the danger.
A filer tapped his SEP-IRA to stop foreclosure on a piece of land. He planned to timely replenish the account by arranging a loan from his broker, but because of unanticipated delays, he didn’t put the funds back until 66 days after he made the withdrawal.
As a result, he is taxed on the payout and owes the 10% penalty, since he wasn’t 59½ (
Alexander, TC Summ. Op. 2014-18).