One of the exceptions to the Sec 72(t) 10% early withdrawal penalty applies to a distribution (lifetime maximum $10,000) from an IRA used by a first-time homeowner to pay qualified acquisition costs of a principal residence before the close of the 120th day after the day the distribution was received. When disaster strikes, sometimes the taxpayer’s plans to purchase or construct the home are upended and the funds from the withdrawal can’t be spent during the allotted time period.

To mitigate this problem, Act Sec 302(b) provides that any individual who received a qualified distribution during the period beginning 180 days before the first day of the incident period of a qualified disaster and ending on the date which is 30 days after the last day of the incident period, may, during the applicable period (defined below), make one or more contributions in an aggregate amount not to exceed the amount of the qualified distribution to an eligible retirement plan. (Act Sec 302(b))

For this purpose, the applicable period begins on the first day of the incident period of the qualified disaster and ends on the date 180 days later.

To qualify to make the re-contribution, the amount distributed had to have been intended to be used to purchase or construct a principal residence in a qualified disaster area, but was not so used because of the qualified disaster with respect to such area.

If the funds are re-contributed, the taxpayer can amend the tax return for the year in which the distribution was taxed for a refund of the taxes paid on the withdrawal.