CSH’s Livia Thomas contributed to this article.
Distributions from a retirement plan can only qualify for tax-free rollover if they are moved to an IRA or another qualified plan by the 60th day after the funds were separated from the account. In the past, individuals who failed to meet the 60-day time frame could only attain a waiver by requesting a private letter ruling from the IRS. But effective August 24, 2016, the IRS has provided a process (Revenue Proc. 2016-47) to help IRA trust companies and retirement plans that receive outside retirement plan rollovers that miss the 60-day requirement.
Now, taxpayers qualify for a waiver from the IRS if they 1) have not had a previously denied waiver request pertaining to the related rollover and 2) have met one or more of the following 11 circumstances:
- An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates
- The distribution, having been made in the form of a check, was misplaced and never cashed
- The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan
- The taxpayer’s principal residence was severely damaged
- A member of the taxpayer’s family died
- The taxpayer or a member of the taxpayer’s family was seriously ill
- The taxpayer was incarcerated
- Restrictions were imposed by a foreign country
- A postal error occurred
- The distribution was made on account of a levy under section 6331 and the proceeds of the levy have been returned to the taxpayer
- The party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information
The taxpayer can provide to the plan administrator or IRA trustee a written certification that the conditions were met. The rollover must then be made to the plan or IRA within 30 days after the reason(s) above no longer prevent the taxpayer from making the contribution. A plan administrator or IRA trustee may rely on a taxpayer’s self-certification in determining qualification of the 60-day rollover waiver, and a taxpayer may report it as a valid rollover. However, the self-certification is not a waiver by the IRS, and during the course of an examination the IRS may determine that the taxpayer did not qualify for a waiver and therefore is subject to penalties and additional taxable income.
If you have questions about the new process or waiver qualifications, contact your CSH advisor.