IRS Grants 11 Exceptions to 60-Day Retirement Rollover Rule

If you are unable to roll over an IRA or 401(k) within 60 days, the federal government now will cut you a break under certain circumstances.

Better Investing

The federal government just made retirement saving a little easier.

If you are unable to roll over a retirement plan or IRA distribution into another retirement plan or IRA within the 60-day time limit, the Internal Revenue Service will cut you a break under certain circumstances.

This week, the IRS announced a new procedure — technically called “Revenue Procedure 2016-47” — that enables eligible taxpayers to receive a waiver of the 60-day time limit. Such a waiver can help you avoid possible tax penalties.

The IRS explains:

Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.

Now, however, a taxpayer who misses the 60-day deadline may qualify for a waiver if any of 11 circumstances apply to the taxpayer. Those circumstances are:

  1. An error was committed by the financial institution making the distribution or receiving the contribution.
  2. The distribution was in the form of a check and the check was misplaced and never cashed.
  3. The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA.
  4. My principal residence was severely damaged.
  5. One of my family members died.
  6. I or one of my family members was seriously ill.
  7. I was incarcerated.
  8. Restrictions were imposed by a foreign country.
  9. A postal error occurred.
  10. The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to me.
  11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite my reasonable efforts to obtain the information.

The new procedure also includes what the IRS describes as “a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver.”

This self-certification letter from the taxpayer replaces the previously required letter ruling from the IRS.

Have you ever had issues when rolling over a retirement distribution? Share your thoughts below or on Facebook.

Stacy Johnson

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