Is there a new one-rollover-per-year rule for 2015?
Yes. The Internal Revenue Code says that if you receive a distribution from an IRA, you can't make a tax-free
(60-day) rollover into another IRA if you've already completed a tax-free rollover within the previous
one-year (12-month) period. The long-standing position of the IRS was that this rule applied separately to
each IRA someone owns. In 2014, however, the Tax Court held that regardless of how many IRAs he or she owns, a taxpayer may make only
one nontaxable 60-day rollover within each 12-month period.
The IRS announced that it would follow the Tax Court's decision, but that the revised rule would not apply to any
rollover involving an IRA distribution that occurred before January 1, 2015. The IRS recently issued further guidance on how the revised
one-rollover-per-year limit is to be applied. Most importantly, the IRS has clarified that:
- All IRAs, including traditional, Roth, SEP, and SIMPLE IRAs, are aggregated and treated as one IRA
when applying the new rule. For example, if you make a 60-day rollover from a Roth IRA to the same or
another Roth IRA, you will be precluded from making a 60-day rollover from any other IRA--including
traditional IRAs--within 12 months. The converse is also true--a 60-day rollover from a traditional IRA to
the same or another traditional IRA will preclude you from making a 60-day rollover from one Roth IRA
to another Roth IRA.
- The exclusion for 2014 distributions is not absolute. While you can generally ignore rollovers of 2014
distributions when determining whether a 2015 rollover violates the new one-rollover-per-year limit, this
special transition rule will NOT apply if the 2015 rollover is from the same IRA that either made, or
received, the 2014 rollover.
In general, it's best to avoid 60-day rollovers if possible. Use direct (trustee-to-trustee) transfers--as opposed to 60-day
rollovers--between IRAs, as direct transfers aren't subject to the one-rollover-per-year limit. The tax
consequences of making a mistake can be significant--a failed rollover will be treated as a taxable
distribution (with potential early-distribution penalties if you're not yet 59½) and a potential excess
contribution to the receiving IRA.
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To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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|Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.