Historically, in order for IRA owners to avoid current taxation, the account owner must rollover a distribution received from an employer plan or IRA to another plan or IRA within 60 days after receiving the distribution. There exists a few exceptions to this rule that allow the IRS to waive the 60-day limit. In order to qualify for this exception, IRA owners needed to obtain a private letter from the IRS. Now, a recent change in IRS rules (Rev. Proc. 2016-47) provides IRA owners with a simpler “self-certification” procedure that allows taxpayers who meet one of eleven criteria to make a rollover past the 60-day limit, without needing a private letter.
According to Nasdaq
, these mitigating circumstances can included cases when a distribution check was misplaced and never cashed; if the taxpayer’s home was severely damaged; or if the IRA owner or their family member becomes severely ill or dies. This new 60-day waiver alternative is still subject to IRS audit; however, the new procedure could provide some flexibility for those IRA owners who want to perform a late rollover, and meet one of the eleven criteria listed on the IRS website.
Despite this new convenience rule for late rollovers, there is more than one IRA distribution strategy available to retirement investors. According to Nasdaq, “the revenue service is encouraging eligible taxpayers who wish to transfer their retirement plan or IRA distributions 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.”
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