IRA

IRS Announces New Relief for Missed 60-Day Rollovers

September 21, 2016

You may often hear the question from clients, "When does the 60-day period start for purposes of a rollover?"

The quick answer is that the 60-day period starts from the day the taxpayer receives rollover funds; but then the inevitable follow-up questions come: "What if the check never comes or is significantly delayed?" "How does the IRS know I made it within the 60 days?" Well, the IRS has recently issued new guidance to help answer those questions.

You may often hear the question from clients, "When does the 60-day period start for purposes of a rollover?" The quick answer is that the 60-day period starts from the day the taxpayer receives rollover funds; but then the inevitable follow-up questions come: "What if the check never comes or is significantly delayed?" "How does the IRS know I made it within the 60 days?" Well, the IRS has recently issued new guidance to help answer those questions.

On August 24, 2016, the IRS announced a new self-certification procedure focused on helping taxpayers who inadvertently miss the 60-day time limit to qualify for a waiver and avoid possible early distribution taxes on a late rollover. Revenue Procedure 2016-47 provides taxpayers with a sample self-certification letter that can be submitted to a plan administrator or IRA trustee attesting that the taxpayer's late rollover can be accepted by the administrator or trustee due to the taxpayer meeting one of the conditions in the revenue procedure. This procedure is different than what current practice allows since the request for relief is directed to the plan administrator or IRA trustee rather than the IRS. 

In the self-certification letter, the taxpayer must confirm that he/she has met one or more of the 11 conditions (subject to audit) described in the revenue procedure to qualify for relief. The conditions include:

  1. Financial institution error.
  2. A distribution check that was misplaced and never cashed.
  3. The taxpayer mistakenly thought the account the rollover was deposited into was an eligible retirement plan.
  4. The taxpayer's home was severely damaged.
  5. A family member died.
  6. The taxpayer or family member was seriously ill.
  7. The taxpayer was incarcerated.
  8. Restrictions were imposed by a foreign country.
  9. A postal error occurred.
  10. The distribution was made on account of a levy and the levy was returned to the taxpayer.
  11. The releasing financial institution did not provide information in a timely manner to the receiving plan or IRA despite the taxpayer's reasonable efforts.

After the condition for the delay no longer exists, the taxpayer must complete the rollover contribution "as soon as practicable." The IRS will deem this requirement to be satisfied if the rollover contribution is made within 30 days (i.e., safe harbor) after the condition no longer exists. The IRS will modify Form 5498 to include a selection that reflects this circumstance.

As always, taxpayers should seek guidance from their personal tax advisors if they miss the 60-day rollover time limit to determine the appropriate course of action for their specific situations.

If you have additional questions, please feel free to contact the Retirement Strategies Group directly at (800) 722-2333, ext. 3939, or send an e-mail to RSG@PacificLife.com.


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Caroline Elrod is a Retirement Strategies Consultant with the Retirement Solutions Division at Pacific Life. She brings several years of industry experience to her role that includes tax planning with insurance products. Caroline enjoys educating financial advisors on creative and practical solutions to business, estate and retirement planning concerns.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

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