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IRS Eases Retirement Plan Rollovers

by Mike Godfrey, Tax-News.com, Washington

25 August 2016


The US Internal Revenue Service (IRS) has announced a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement arrangement (IRA).

In Revenue Procedure 2016-47, published on August 24, the IRS explained 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. In addition, 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, the IRS said. 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.

Under the new procedure, a taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances 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 said that, ordinarily, the agency and plan administrators and trustees will honor a taxpayer's truthful self-certification that they qualify for a waiver under these circumstances. The IRS also has the authority to grant a waiver during a subsequent examination even if a taxpayer does not self-certify, the agency added.

TAGS: tax | pensions | retirement | Internal Revenue Service (IRS) | United States

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