Once-Per-Year Rollover Scenarios – What’s Ok and What’s Not Ok | Ed Slott and Company, LLC

Once-Per-Year Rollover Scenarios – What’s Ok and What’s Not Ok

By Sarah Brenner, JD
IRA Analyst
Follow Us on Twitter: @theslottreport
 

The once-per-year IRA rollover rule sounds pretty easy to understand. You may only do one IRA-to-IRA (or Roth IRA-to-Roth IRA rollover) per year (365 days). However, there are many ways it can go wrong. Consider the following two scenarios. One involves multiple distributions and the other involves multiple rollover deposits. One is ok and the other is not.

One Distribution and Multiple Rollover Deposits – That’s Ok!

If you take one distribution from your IRA, you may split the funds and roll them over to multiple IRAs. The rollovers could be done on different days and that would not be a problem. This works for purposes of the once-per-year rollover rule because only one distribution is received even though there is more than one rollover deposit.

Example: Sophie receives a $100,000 distribution from her IRA on June 15. On June 20, Sophie rolls over $75,000 to her IRA. On June 25, she decides to roll over the remaining $25,000 to another IRA. This is not a violation of the once-per year rollover rule because Sophie received only one distribution even though she did two rollovers on two different dates.

Multiple Distributions on Different Days and One Rollover Deposit – That’s NOT Ok!

It is acceptable under the once-per-year rollover rule to take a distribution on one day and roll it over on different days. Is the opposite scenario also allowed? Can you take multiple distributions on different days and deposit them at one time as one rollover? The answer would be no. Even if all the distributions were taken from the same IRA this would still not be allowed. The reason is that only one distribution is eligible for rollover within a 60-day period.

Example: James takes a $2,000 distribution from his IRA on January 10 and another $30,000 distribution on January 12. His plan to roll over both on the same day to a new IRA. Unfortunately for James only one of his IRA distribution is eligible for rollover. This is because the once-per year rule limits him to rolling over only one distribution within 365-day period.

Best Advice - Do Direct Transfers

Knowing all the details of how the once-per-year rule works and how to avoid mistakes is essential! Breaking the rule can potentially lead to negative tax consequences and even the loss of your hard-earned IRA savings.

The best advice is to avoid 60-day rollovers and the complications of the once-per-year rollover rule. You can do this by moving your IRA funds as trustee-to-trustee transfers instead. With a transfer, the funds go directly from one IRA custodian to another. Transfers are not subject to the once-per year rule so you can move your IRA funds this way as many times as you like during the same year.

 

Receive Ed Slott and Company Articles Straight to Your Inbox!
Enter your email address:

Delivered by FeedBurner

 


Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to matt@irahelp.com for approval.

For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at matt@irahelp.com or (516) 536-8282 with any questions.

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.