MISSED A 60-DAY ROLLOVER? THERE MAY BE RELIEF

Article Highlights:

• 60-Day Rollover Requirements
• Financial Institution Error
• Private Letter Ruling
• Self-Certification Procedure

Taxpayers can take a distribution from an IRA or other qualified retirement plan and if they roll it over (put it back) within 60 days they can avoid taxation on the distributed amount. (This provision does not apply to required minimum distributions for taxpayers who are 70.5 years of age and over.) In addition, taxpayers are limited to one IRA-to-IRA rollover per year.

Taxpayers who have missed the 60-day rollover window can get the 60-day period extended in one of the following ways:

Financial Institution Error – Where the failure to meet the deadline is due to financial institution error, the IRS provides an automatic waiver.

Private Letter Ruling (PLR) – Where automatic waiver does not apply, and the taxpayer feels there is a legitimate reason for missing the 60-day rollover requirement, the taxpayer can request relief though a PLR where the IRS reviews the reason for missing the 60-day rollover period and either allows or denies relief from the 60-day requirement. However, the IRS will charge the taxpayer requesting the PLR a user fee of $10,000, which negates the purpose of a PLR except in cases of very large rollover amounts.

New Self-certification Procedure – The IRS recently announced a new certification procedure that allows a taxpayer who misses the 60-day time limit for properly rolling the amount into another retirement plan or IRA to make a written certification to a plan administrator or an IRA trustee that a contribution satisfies one of the acceptable reasons, and therefore is eligible for a waiver of the 60-day rule.

The acceptable reasons for missing the 60-day requirement include:

• An error was committed by the financial institution;
• The distribution check was misplaced and never cashed;
• The distribution was mistakenly deposited into an account that the taxpayer thought was an eligible retirement plan;
• The taxpayer’s principal residence was severely damaged;
• A member of the taxpayer’s family died;
• The taxpayer or a member of the taxpayer’s family was seriously ill;
• The taxpayer 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 the taxpayer; or
• The party making the distribution delayed providing information that was required to complete the rollover of the receiving plan or IRA, despite the taxpayer’s reasonable efforts to obtain the information”?

The rollover must be completed as soon as practicable after the reason(s) listed above no longer prevent the taxpayer from making the contribution. This requirement is deemed to be satisfied if the contribution is made within 30 days after the reason(s) no longer prevent the taxpayer from making the contribution.

This procedure does not apply where the IRS previously denied a waiver request for the same missed rollover.

The IRS provides a model letter that can be used to make the self-certification. Please call this office if you need a copy of the letter, have questions, or need assistance related to a missed 60-day rollover.