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IRS Eases 60-Day Rules on IRA Rollovers

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  |  By Chris Shanahan, CISP®

Taxpayers who miss the 60-day deadline for retirement plan and IRA rollovers may get some relief -- and avoid the possibility of paying early distribution taxes -- under new procedures issued by the IRS.

The new procedures, according to the IRS, are "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)."

When a taxpayer takes a distribution from a workplace retirement plan or an IRA, they then have 60 days to roll those funds back into an IRA[1]. Before the new procedure, for some, missing the 60-day window could have meant the rollover was no longer tax-free and the money became taxable and possibly subject to a 10% early withdrawal penalty. In most cases, taxpayers who failed to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS, but that process is expensive and time consuming.

Now, under Revenue Procedure 2016-47, the IRS has outlined a self-certification procedure that allows taxpayers to qualify for a waiver of the 60-day rollover time limit in certain circumstances. In order to file a self-certification, the IRS must not have previously denied a waiver request for the distribution in question, and a taxpayer's reason for missing the 60-day rollover deadline must be due to one or more of the following circumstances:

  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 was never cashed.
  3. The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan.
  4. The taxpayer experienced severe damage to his or her principal residence.
  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. A postal error occurred.
  10. The distribution was made due to a levy under code §6331 and the proceeds of the levy were returned to the taxpayer.
  11. The party making the rollover distribution delayed providing information that the receiving plan or IRA required to complete the rollover, despite the taxpayer’s efforts to obtain the information.

The IRS says it will "ordinarily honor a taxpayer's truthful self-certification that they qualify for a waiver under these circumstances."

While the self-certification process is not a waiver by the IRS, for taxpayers to take advantage of the new procedure, the IRS said the contribution has to be made “as soon as practicable” (which it defines as 30 days) after the reasons for failing to make the rollover no longer prevent the taxpayer from making the contribution.

For investors who have missed the deadline, the revenue procedure contains a model self-certification letter that can be used by taxpayers to self-certify the late rollover contribution, although the IRS may still determine that the rollover is invalid.

For additional questions about the self-certification process, IRA rollovers and the exceptions that apply (e.g. custodians are not required to accept the letter), we recommend reaching out to your financial professional or Certified Public Accountant (CPA). For assistance finding a financial professional who may be knowledgeable about the new IRS IRA rollover self-certification procedures, you can visit our Professional Directory.


[1] Keep in mind there is a limit to one rollover of IRA distributions per 12 month period.  See IRS Publication 590 for more information.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.

PENSCO Trust Company performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. PENSCO is indirectly affiliated with a registered broker dealer and with a licensed small business investment company through Opus Bank (“Opus Affiliates”). Other than the Opus Affiliates, PENSCO is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.