Rolling over a retirement plan into another employer plan or IRA can be a difficult process if unforeseen circumstances arise. Typically, a taxpayer must roll a distribution received from an employer plan retirement account or an IRA to another employer plan or IRA within 60 days after receiving the distribution to avoid taxation. The IRS has had the ability to waive this 60-day limit in certain circumstances, but a private letter ruling was usually needed.
The IRS has recently provided a new procedure for taxpayers to complete a simpler “self-certification” in certain circumstances. Taxpayers who meet one of 11 criteria, are able to waive the 60-day limit without needing a private letter ruling and the distribution is not subject to tax. Some of the criteria include:
- An error was committed by the financial institution
- The distribution check was misplaced and never cashed
- The distribution was deposited into an account the taxpayer thought was an eligible retirement plan
- The taxpayer’s principal residence was severely damaged
- A member of the taxpayer’s family died or was seriously ill
Revenue Procedure 2016-47 covers all 11 criteria and includes a sample letter to provide to the plan administrator or trustee verifying self-certification and claiming which condition(s) are met. Ordinarily, the IRS and plan administrators/trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances; however, it is subject to later IRS audit.
Taxpayers are encouraged to transfer retirement plans via direct rollover or trustee-to-trustee transfers instead of doing a regular rollover to avoid delays and some of the restrictions and headaches that arise during the rollover process. For more information on this new revenue procedure or help with retirement plan rollovers, contact an Anders advisor today.