Florida Elder Law & Estate Planning Blog


IRS relaxes rule for late retirement plan rollovers

September 24, 2016
deadline

Taxpayers rolling over a distribution from an IRA or other retirement account into another account must complete the rollover within 60 days of taking the distribution, or face paying income tax on those funds. In the past, if you failed to meet the deadline, the only recourse was to apply for a Private Letter Ruling from the Internal Revenue Service. That involved quite a bit of paperwork, a filing fee, and typically, a slow turnaround. Now, the IRS is cutting tardy taxpayers a bit more slack.

Under a new rule, the IRS will permit some people with tardy rollovers to avoid the Private Letter Ruling procedure and, instead, “self-certify.” Essentially, self-certification entails requesting a waiver directly from the administrator of the recipient plan. The self-certification procedure is available only to those taxpayers whose rollovers are delayed because of one or more of these mitigating circumstances:

  • The distribution was paid by check, and the check was misplaced or lost and never cashed.
  • An error was made by the financial institution making the distribution or the financial institution accepting the deposit.
  • The taxpayer rolled over the distribution into an account he/she erroneously thought was an eligible retirement plan.
  • The taxpayer’s main residence was significantly damaged or destroyed.
  • A family member was seriously ill.
  • A family member passed away.
  • The delay was due to an error by the postal service or other delivery agent.
  • The plan making the distribution failed to provide on a timely basis all the information the receiving plan required, despite the taxpayer’s attempts to obtain the information.
  •  A foreign nation restricted the transfer for various reasons.
  • The taxpayer was incarcerated.

Once the mitigating reason for the delay is eliminated, the taxpayer has 30 days to deposit the funds.

If you have exceeded the 60-day rollover deadline,  meet one or more of the above criteria and wish to self-certify to obtain a waiver, use the model letter the IRS provides and submit it to your recipient plan. See it here (scroll to page 5). Read more about the new self-certification procedure here.