Washington, D.C. (August 24, 2016)
By Michael Cohn
The Internal Revenue Service unveiled a new procedure Wednesday to help people who accidentally miss the 60-day time limit for rolling over their retirement plan distributions into another qualified retirement plan or individual retirement account.
In Revenue Procedure 2016-47, the IRS details how eligible taxpayers can qualify for a waiver of the 60-day time limit and avoid possible taxes and penalties on early distributions, if they meet certain circumstances. The revenue procedure includes a sample self-certification letter that a taxpayer can use to notify an administrator or trustee of the retirement plan or IRA receiving the rollover that the taxpayer qualifies for the waiver.
Typically, an eligible distribution from an IRA or workplace retirement plan can only qualify for a tax-free rollover if it’s contributed to another IRA or workplace plan by the 60th day after it’s received. In most cases, taxpayers who don’t meet that 60-day time limit can only obtain a waiver by asking for a private letter ruling from the IRS.
A taxpayer who misses the two-month time limit will now be able to ordinarily qualify for a waiver if one or more of the 11 circumstances listed in the revenue procedure apply to them. The mitigating circumstances might be, for example, if a distribution check was misplaced and never cashed, or if the taxpayer’s home was severely damaged, or a family member died, or the taxpayer or a family member was seriously ill, or 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. Even if a taxpayer does not self-certify, the IRS will now have 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.
The IRS is encouraging eligible taxpayers who wish to transfer their retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process, the IRS pointed out. For more information, visit the "Can You Move Retirement Plan Assets?" section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions page on IRS.gov.