Compliance

IRS Revenue Procedure Eases Rollover Deadline Enforcement

In the presence of “a variety of mitigating circumstances,” taxpayers can now qualify for a waiver of the 60-day time limit generally placed on tax-free plan-to-plan or individual retirement account rollovers. 

By John Manganaro editors@plansponsor.com | August 26, 2016
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The Internal Revenue Service (IRS) introduced a new self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement account (IRA).

In Revenue Procedure 2016-47, posted this week on IRS.gov, the IRS explains how eligible taxpayers “encountering a variety of mitigating circumstances” can qualify for the waiver, which will effectively extend the 60-day time limit on tax-qualified rollovers and therefore help investors avoid early distribution taxes and penalties stemming from rollover mistakes. In addition, the revenue procedure includes 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.

As 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.

A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer’s home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.

“Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances,” IRS says. “Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the revenue procedure.”

NEXT: Important implications for retirement readiness  

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