IRA Private Letter Ruling Fees for 2015

Friday, January 09, 2015

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

Private letter ruling (PLR) requests for IRAs are a means for taxpayers to request forgiveness from IRS and to allow them to complete an action that has, for some reason, been derailed. For instance, you can ask IRS to allow you to complete a Roth recharacterization after the deadline has passed or to allow you to complete a 60-day rollover after the 60 days have passed. These are two instances where IRS has the authority to grant you forgiveness – under certain circumstances.

Many times IRS does not have the authority grant forgiveness to taxpayers. This is the case when a non-spouse beneficiary takes a distribution from an inherited IRA payable to themselves. Non-spouse beneficiaries cannot do a 60-day rollover to another inherited IRA and IRS has no authority to allow them to do so. The same is true when a taxpayer does more than one 60-day rollover in a 12-month period. There is no forgiveness when this happens.

IRS forgiveness comes at a cost. IRS has just released the fee information for PLRs requested in 2015. The good news is that the fees have not increased. The bad news is that the fees have not gone down either. Most IRA PLRs come with a fee of $10,000. For your $10,000, you will have to wait at least nine months in most cases for a decision, and you have NO guarantee that the decision will be a favorable one. You also have to factor in the cost to have a professional prepare your PLR request, which can run another several thousand dollars.

There are lower PLR fees for late Roth recharacterizations, $4,000, and for 60-day rollovers, $500 – $3,000 depending on the amount of the rollover.

IRA mistakes are not cheap. You can lose all or part of your IRA, have to pay income tax on the amount no longer in the IRA, pay a 10% early distribution penalty (if applicable), or turn to IRS for forgiveness and pay the fees for a PLR. Clearly the better option is to not make the mistake in the first place, but that is not always easy. When asking questions about your IRA, make sure you inquire about the individual’s level of knowledge and the source of that knowledge. Ask to have the advice given to you in writing or to have a reference to the applicable tax code section supplied to you.

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