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There are all sorts of problems that can crop up when attempting to complete a 60-day rollover of qualified funds to an IRA. Sometimes you can be granted an automatic waiver of the 60-day rule, but only if all of the following apply:
- The financial institution receives the funds on your behalf before the end of the 60-day rollover period.
- You followed all the procedures set by the financial institution for depositing the funds into an eligible retirement plan within the 60-day period (including giving instructions to deposit the funds into an eligible retirement plan).
- The funds are not deposited into an eligible retirement plan within the 60-day rollover period solely because of an error on the part of the financial institution.
- The funds are deposited into an eligible retirement plan within 1 year from the beginning of the 60-day rollover period.
- It would have been a valid rollover if the financial institution had deposited the funds as instructed.
If the above conditions do not apply, you can still request a ruling from the IRS, called a Private Letter Ruling (PLR), if you still think your circumstances merit the inclusion of your rollover even though it was beyond the 60-day period. There is a $3,000 fee for requesting the PLR.
When making a determination on your request, the IRS will consider all of the following details:
- Whether errors were made by the financial institution (other than those described under ”Automatic waiver”, earlier),
- Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error,
- Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check), and
- How much time has passed since the date of distribution.
If you are planning to request a PLR, keep in mind that the costs can be quite high. In addition to the earlier-listed $3,000 user fee, the cost for a tax attorney to prepare the request can be anywhere from $3,000 to $10, 000 and more, depending upon the complexity.
Once again, the problems you find with the 60-day rollover highlight the benefit of doing the relatively painless trustee-to-trustee transfer.
Click the link to pick up a copy of A Social Security Owner's Manual or if you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.
I can learn from you, you can learn from me - please leave your comments and links!Jim Blankenship, CFP®, EA, is an expert in personal retirement, IRAs, and tax issues, with more than 25 years of experience in the industry. Read more from this author
And if you've come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed "advisor's advisor".