IRS Offers Some Help on Rollovers

By Nevin Adams • August 24, 2016 • 0 Comments
The IRS has provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day rollover window.

In Revenue Procedure 2016-47, the IRS explains how eligible taxpayers, “encountering a variety of mitigating circumstances,” can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. 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.

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.

Waiver Circumstances

The new waiver process will apply 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.

The IRS says that 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. 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.

In the notice, the IRS also encourages eligible taxpayers wishing to transfer 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.