The Internal Revenue Service today provided 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).
Revenue Procedure 2016-47
In Revenue Procedure 2016-47, posted today on IRS.gov, 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.
General Rule for Rollovers
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 of the 60-Day Time Limit
A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them. These 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
- Restrictions were imposed by a foreign country
IRS and Plan Administrator Acceptance
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.
IRS Recommendations for Rollovers
The IRS 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.
Doing so can help avoid some of the delays and restrictions that often arise during the rollover process.
Frequently Asked Questions
What is the 60-day rollover rule for retirement distributions?
The 60-day rollover rule requires that distributions from an IRA or workplace retirement plan must be rolled over into another eligible plan or IRA within 60 days to avoid taxes and potential penalties.
What if I miss the 60-day deadline for a rollover?
If you miss the 60-day deadline, you may still qualify for a waiver by using the IRS’s self-certification procedure, provided your delay was due to one of several listed mitigating circumstances.
What is Revenue Procedure 2016-47?
Revenue Procedure 2016-47 outlines the IRS’s self-certification process for taxpayers who miss the 60-day rollover deadline. It includes eligible circumstances for waivers and a sample letter for self-certification.
How do I self-certify a missed rollover deadline?
You can use the sample letter provided in Revenue Procedure 2016-47 to inform your plan administrator or IRA trustee that you qualify for a waiver under the listed exceptions and are eligible to complete the rollover.
Is it better to do a direct transfer instead of a rollover?
Yes, the IRS recommends requesting a direct trustee-to-trustee transfer because it avoids many of the delays and complications associated with the 60-day rollover rule.