In late August, the IRS announced new rules that will help retirement savers who aim to roll over distributions from qualified retirement plans or IRAs into another such plan — but who unintentionally miss the 60-day window for doing so — to avoid paying possible taxes and early distribution penalties.
Prior to this announcement, in order to qualify for tax-free rollover status account holders of workplace retirement plans or IRAs would need to roll the proceeds into another employer-sponsored retirement plan or IRA by the sixtieth day after which they received the distribution.
In Revenue Procedure 2016-47, the IRS details its decision to allow taxpayers to claim eligibility for a waiver of the 60-day requirement. Included in the IRS document is a sample “self-certification” letter that individuals can present on their own behalf to the IRA trustee or administrator of the plan receiving the rollover. In order to file the self-certification letter, the IRS must not have denied a previous waiver request with respect to this particular rollover. Additionally, the letter should list one or more of the 11 qualifying situations that caused the person to miss the 60-day deadline.
Eleven Reasons to Waive
The RP 2016-47 self-certification sample letter lists the following conditions as qualifying events:
- An error was committed by the financial institution making the distribution or receiving the contribution.
- The distribution was in the form of a check and the check was misplaced and never cashed.
- The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA.
- My principal residence was severely damaged.
- One of my family members died.
- I or one of my family members was seriously ill.
- I was incarcerated.
- Restrictions were imposed by a foreign country.
- A postal error occurred.
- The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to me.
- 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.
Typically, given the circumstances indicated in the letter, the IRS and the plan administrator or IRA trustee receiving the rollover funds should accept a taxpayer’s self certification as a legitimate claim to a waiver.
The IRS still encourages individuals to simplify matters when transferring assets from one qualified retirement plan or IRA to another by requesting a direct trustee-to-trustee transfer, rather than handling the rollover themselves.
For more information about rollovers and transfers, check out the Can You Move Retirement Plan Assets? section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions page on IRS.gov.
IRS, “New Procedure Helps People Making IRA and Retirement Plan Rollovers,” August 24, 2016.
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