New Relief for Late Retirement Account Rollovers

The Internal Revenue Service recently provided new relief for failures to comply with the 60 day deadline for the rollover of distributions from retirement accounts. The 60 day rollover period relates to the process for moving funds from one retirement account to another – a process which is most common when a person is switching jobs. After receiving a distribution from a retirement account, if the funds are not deposited into another retirement account within 60 days, the distribution becomes taxable.

Previously, if an individual unintentionally violated the 60 rollover period, the only option for relief was to request a private letter ruling (PLR) from the Internal Revenue Service, which can cost up to $10,000. As a result of a new Revenue Procedure, there is a new process for failed retirement account rollovers.

An individual may now provide a financial institution with a “self-certification” to correct a failed rollover based on specific permitted reasons. Those reasons are listed below:

1. The financial institution receiving the contribution or making the distribution to which the contribution relates made an error;
2. The distribution check was misplaced and never cashed;
3. The distribution was deposited into an account that the taxpayer mistakenly thought was an eligible retirement plan;
4. The taxpayer’s principal residence was severely damaged;
5. A member of the taxpayer’s family died;
6. The taxpayer or a member of the taxpayer’s family was seriously ill;
7. The taxpayer was incarcerated;
8. Restrictions were imposed by a foreign country;
9. The post office made an error;
10. The distribution was made on account of a levy under Sec. 6331, the proceeds of which have been returned to the taxpayer; or
11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain it.

For more information, see the Internal Revenue Service, Revenue Procedure 2016-47, available at https://www.irs.gov/pub/irs-drop/rp-16-47.pdf.

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