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Sometimes it's true: No good deed goes unpunished. If you were among those virtuous taxpayers who elected to have their tax refunds deposited directly into an IRA this year, you may have been taken aback when you learned that your economic-stimulus check, too, had been deposited directly into the same account. And it could be a real concern if you have already contributed the maximum amount to your IRA or if you had other plans for your tax rebate.
Not to worry. The Internal Revenue Service says you can withdraw up to the full amount of your stimulus check without triggering taxes or the 10% early-withdrawal penalty for someone younger than 59 1/2. And you don't have to withdraw earnings on that amount, even if you previously contributed the maximum of $5,000 ($6,000 if you are 50 or older) to your IRA. Typically, earnings on excess contributions have to be withdrawn, but the IRS waived that rule.
The money will be treated as if it had never gone into the account. You have until April 15, 2009 (or October 15, 2009, if you file for an extension on your 2008 taxes) to get your money back. In the interim, your IRA can get an additional earnings boost. The do-over rule applies only to your stimulus check, not to your tax refund.
ALSO SEE: Answers to Your Tax Rebate Questions
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