10 Things You Should Know about the New Fix for Late IRA Rollovers | Ed Slott and Company, LLC

10 Things You Should Know about the New Fix for Late IRA Rollovers

By Sarah Brenner, IRA Analyst
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There is good news for everyone with a retirement account. The IRS recently released Revenue Procedure 2016-47, which provides a new and easier way for you to complete a late 60-day rollover of retirement funds using a self-certification procedure. Here are 10 things you should know about this new procedure that just might save your retirement savings.

  1. The new self-certification procedure is available for missed 60-day rollover deadlines for both IRAs, including Roth IRAs, SEP IRAs and SIMPLE IRAs, and company plans.
  2. This new procedure can provide an immediate and cost-free fix for a missed rollover deadline potentially saving you from taxes, penalties, and the loss of your retirement savings.
  3. To qualify, you cannot have been previously denied a waiver by the IRS and the reason for your late rollover must be one in a list of eleven specific reasons provide by the IRS. Among them are common reasons for late rollovers, including serious illness and mistakes by the financial institution.
  4. There is no “miscellaneous” or “other” category when it comes to the self-certification process. If you are late for a reason that is not one of the eleven, then presumably, you would still need to go through the process of filing a private letter ruling (PLR) to seek relief.
  5. You must redeposit the funds in a retirement account as soon as possible after the reason or reasons no longer prevent you from making the contribution. There is a 30-day safe harbor window to meet this requirement.
  6. You must make a written certification to a plan administrator or an IRA custodian that a contribution satisfies the conditions for a waiver. The IRS has even provided a model letter that should be used for this written certification requirement. This can be found in the Appendix to Rev. Proc 2016-47.
  7. Self-certification is not a waiver by IRS. You are not necessarily completely off the hook. You are allowed to report a contribution as a valid rollover on your tax return, but the IRS can still later audit your return and determine that a waiver was not appropriate.
  8. Late rollovers through self-certification will be on the IRS’ radar. Reporting from the IRA custodian will tip off the IRS that a late rollover has occurred.
  9. If you violate another rollover rule other than missing the deadline, you are out of luck. The self-certification process will not help you. For example, if you do more than one IRA-to-IRA or Roth IRA-to-Roth IRA 60-day rollover in a 12-month period, this mistake cannot be fixed with the new self-certification procedure. Really, when you make that mistake, nothing good happens.
  10. While the new procedure is helpful, your best bet to avoid missing the deadline as well as other rollover errors is to stick with trustee-to-trustee transfers and direct rollovers when you are looking to move your retirement funds.

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