Savers Get a Break on IRA Rollovers
Missed the deadline? The IRS may cut you some slack.
New rules at the IRS cut you a break when you’re rolling over one retirement account to another. If you don’t roll over funds within 60 days, the money is treated as a distribution, subject to penalty (if you’re under 59 1/2) and taxes. You always had the option of applying for a waiver and then waiting for a private letter ruling from the IRS, with the money in limbo in the meantime. Now, you’ll get the benefit of the doubt if you submit a statement saying that you missed the deadline for one of 11 reasons. Among them: the financial institution receiving or making the distribution made an error; the taxpayer or a family member was seriously ill; or the most time-honored of all, the Post Office messed up.
The IRS provides a template for certifying that you qualify for the waiver. With the form, the financial institution where you want to move the money can accept it as a qualified rollover. You can also report the contribution as a rollover on your tax return. The IRS could later determine that you either didn’t meet the requirement or didn’t make the contribution as soon as you could have, in which case you could still be subject to taxes and penalties. Avoid such snafus by having the distribution transferred directly from one institution to the other.