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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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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