OUR THOUGHTS ON:

On August 25, the IRS announced a new procedure to help people who miss the 60-day time limit for rolling over their retirement plan distributions into another qualified retirement plan or individual retirement account.  The new Revenue Procedure is 2016-47.

An eligible distribution from an IRA or workplace retirement plan has in the past only qualified for a tax-free rollover if it was contributed to another IRA or workplace plan by the 60th day after it was received. The only exception had been requesting a private letter ruling from the IRS. Missing the 60-day deadline has traditionally meant possibly having extra tax and penalty provisions added on early distributions.

The IRS will now allow taxpayers who miss the two-month time limit to qualify for a waiver if one or more of the eleven circumstances listed in the revenue procedure applies to them. A taxpayer will now also be able to fill out a truthful self-certification to provide to the IRS and to plan administrators with information on why the 60-day deadline was missed.  The IRS has also given itself the authority to grant a waiver during a subsequent examination.

The IRS is encouraging eligible taxpayers who wish to transfer their retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer of the funds, rather than doing a rollover of funds. This will avoid some of the delays and restrictions that often arise during the rollover process.  

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