Let’s take a look at three important rules if contemplating an IRA rollover:

First, the money must be returned within 60 days, or the distribution is taxed, assuming no direct rollover. It’s also hit with an early payout penalty for people under age 59½. The IRS offers relief if you return the funds to the IRA after the 60-day period. You can self-certify that you qualify for a waiver of the 60-day rule, provided you meet certain conditions. The late rollover must be for one of 11 reasons and be completed within 30 days after the reason for failing to timely do it in the first-place ceases. If you are unable to meet these conditions, your only option is to seek a private letter ruling from IRS.

Second, you must roll over the same property that you received from the IRA. For example, if you took a cash distribution, then cash must be deposited in a rollover. If the payout was in 100 shares of Disney stock, those same shares must be put back. Like for like.

Third, don’t violate the one-rollover-every-12-months rule. This rule applies on an aggregate basis to all your IRAs, not on an IRA-by-IRA basis. Note that IRA owners with multiple IRAs can make unlimited trustee-to-trustee transfers between IRAs in a 12-month period, because such direct transfers aren’t considered rollovers.  if the IRA owner is given a check payable to the new IRA for his or her benefit.

Pin It on Pinterest