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IRA Rollover Relief

03.30.2017 | eVisor

The IRS issued guidance providing welcome relief to taxpayers who have attempted to roll over an individual retirement arrangement (IRA), but were not able to successfully get the money into a new retirement account within 60 days. The guidance allows taxpayers to self-certify the failure if the reason is one of eleven specified reasons. Previously, the mechanism for fixing a 60 day problem, in many cases, was to request a private letter ruling from the IRS.

Generally, distributions from a qualified plan or IRA are included in gross income. However, the amount distributed can be excluded if the income is transferred to an eligible retirement plan within 60 days of the receipt. The IRS is permitted to waive the 60-day rollover requirement when the failure is due to events that are beyond the reasonable control of the taxpayer.

Under the new procedure, taxpayers can provide a written certification to a plan administrator or IRA trustee that the failure is due to one of eleven specified reasons (e.g., the money was mistakenly deposited into the wrong account). A taxpayer cannot use the procedure if the IRS previously denied a waiver request.

To meet the requirements of the procedure, the taxpayer must make the contribution to the correct account as soon as practicable after the reason for failure no longer prevents the contribution. A taxpayer will be deemed to have met the timing requirement if the contribution is made within 30 days after the reason for failure no longer prevents the contribution.

A plan administrator or IRA trustee can rely on the taxpayer’s self-certification in determining whether the taxpayer is entitled to a waiver of the 60 day rollover requirement (unless he or she has actual knowledge contrary to the self-certification).

Taxpayers applying the self-certification procedure are entitled to take the position on tax returns on which a valid rollover occurred. This position is subject to audit by the IRS and could be challenged at a later time.

The guidance includes a model letter to a plan administrator or IRA trustee that can be used by taxpayer’s to apply the self-certification procedure.

Questions? Contact your Berdon advisor. Berdon LLP, New York Accountants