Tag Archives: rollover

60-Day Rollover

60-Day Rollover rule was part of the IRA rollover rules that have been clarified. Unfortunately, they are now more heavily restricted. The IRS limits one rollover from an IRA to another IRA in any 12-month period. The difference is that the limit will now apply by aggregating all IRAs, effectively treating them as one for purposes of the one rollover per 12-month period limit.

60-day rollover, rollover change, rollover rule

60-Day rollover change affects you how?

Basically, in the past, one could theoretically have multiple IRAs and take a distribution from one IRA to contribute to another IRA.  In this way, one could theoretically string out a 60-day rollover indefinitely as long as one had enough IRAs out there.  The change now restricts one 60-day rollover per 12 month period, per taxpayer. That being said, a married couple might be able to string out a 60-day rollover over 120 days if they timed it properly between each of their IRAs.

However, if you want a happy marriage, I would never ever drag my wife into such shenanigans. Maybe you should give Alex Franch, BS EA  at Worthtax a call the next time you have a question about an IRA rollover. He just might be able to save you a whole lot of grief.

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Only One IRA Rollover Every 12 Months – Period!

Withdrawal, Transfer, Conversion, Retirement, IRA rollover, This subject of only one IRA rollover every twelve months has been brought up before. Yes, we are harping on the subject because of the profound tax consequences. This is a reminder that, beginning this year, we repeat, individuals are only allowed one IRA rollover in any 12-month period. This includes SEP and Simple accounts, traditional and Roth IRAs. That is, 12 months must have elapsed from the date a rollover is completed before another rollover can be made. Failure to abide by this rule can be expensive. And the rule applies no matter how many IRAs an individual owns.

Example

Joe makes an IRA rollover on March 1, 2015. He cannot roll over another IRA distribution, without penalties, until March 2, 2016.

If Joe, in the example, was to make another IRA rollover before March 2, 2016, that entire distribution would be treated as a taxable distribution. It would also be subject to the 10% early distribution penalty if Joe is under the age of 59-1/2 at the time of the distribution. Additionally, if Joe deposited the distributed amount into another IRA, or redeposited the funds into the same IRA, those funds are treated as an excess contribution. They are subject to a 6% penalty per year for as long as they remain in the IRA.

IRA Rollover versus IRA Transfer

That does not mean you cannot transfer funds between IRA trustees multiple times during the year. In a rollover, a taxpayer takes possession of the funds and then must redeposit them within 60 days to avoid being taxed on the distribution. In contrast, a transfer moves the funds directly from one trustee to another with the taxpayer never taking possession of the funds. Unlimited direct transfers are allowed, including moving traditional IRA funds to a Roth IRA. This is called a conversion.

What If the Trustee Makes a Mistake?

If, through no fault of yours, a trustee does not follow your instructions to make a transfer and instead distributes the funds to you, procedures are available to obtain relief. But it must be 100% an error on the part of the trustee.

Are you Planning an IRA Rollover?

If you are planning an IRA rollover, before taking the distribution, please check with your IRA trustee or call Alex Franch, BS EA  at this office a call at 781-849-7200 to ensure you are not violating the 12-month rule. A mistake could cost you a lot of money.

 

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IRA Rollover Limits: Beware of 2015 Changes

IRA RolloverFor many years, the tax code has allowed an individual to take a distribution from his or her IRA account, This allowed the tax payer to avoid the tax and early distribution penalties if the distribution is redeposited to an IRA account owned by the taxpayer within 60 days of receiving the distribution. However, beginning this year, taxpayers will be limited to one IRA rollover per year.

Early in 2014, in a tax court case, the court ruled that taxpayers could only have one IRA rollover per 12-month period. This was contrary to the IRS’s long-standing one rollover per every IRA account every 12 months. This far more liberal position had also been included in published IRS guidance. However, contrary to general public opinion, guidance provided by the IRS in their publications is not listed, carries no weight in audit nor court, and only represents the IRS’ interpretation of tax law.

As a result, the IRS has been forced to adopt the Court’s more restrictive position, It did not apply the new interpretation until this year. This gives taxpayers time to become aware of the new restrictions. The IRS is modifying its published 2015 guidance to reflect this new position.

The IRS announced in November that the one-per-12-month-period IRA rollover rule also applies to Simplified Employer Pension Plans (SEPs) and SIMPLE plans. Included in the November announcement, the IRS indicated it would not count a distribution taken in 2014 and rolled over in 2015 (within the 60-day limit) as a 2015 rollover.

Not counted towards the one-per-12-month rule are traditional to Roth IRA conversions or trustee-to-trustee IRA transfers. These are where the funds are directly transferred from one IRA trustee to another.

Questions About Your IRA Rollover?

Do you have questions about the one-per-12-month limit? Please call this office if you are planning an IRA distribution and subsequent IRA rollover. If you have questions, thoughts or concerns regarding how to file IRA rollover information, WorthTax can help. We will review your taxes for you and advise you what is best for your tax filing status. We guarantee our pricing and discounts are available. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

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Tax Season is Here!

Time flies! Before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment. Learn about our client discounts here. See our locations.

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