Skip to main content
No. of Recommendations: 3
http://www.marketwatch.com/story/ira-rollover-ruling-stuns-a...

Better explained here: http://www.marketwatch.com/story/new-ira-rollover-rule-comin...


The IRS recently issued Announcement 2014-15 in which it states that beginning in 2015, another condition will apply to making a tax free rollover — no other rollover can have been made from any other of the taxpayer's IRAs within the prior 365 days. In the past, the once a year rule was applied on a per IRA basis. Some taxpayers would use multiple IRA accounts to string together several 60-day periods and effectively give themselves an interest free loan from their IRA funds. After the tax court ruling in Bobrow v Commissioner , this IRS announcement essentially states the once a year restriction will apply on a per taxpayer basis. The IRS has made this effective in 2015 to allow taxpayers and IRA custodians time to adapt and the IRS to update Publication 590.

Please note that it is common for people to use the term "rollover" to refer to any transfer of retirement account assets. Technically, this rule doesn't apply to transfers such as trustee to trustee transfers or "direct rollovers" wherein an IRA custodian sends the money directly to another IRA without the taxpayer taking possession.


I've seen this rollover loan strategy used on other boards, such as when needing funds to buy a home before a prior sale closes. I doubt many on this board play those games, but FYI. More importantly, use those allowed custodial transfers rather than taking the check in your hand. We were once handed a check to transfer on our own, told it was not a problem as long as we got it into another account within 60 days. Now understanding this limit, I would have resisted that more decisively.

IP

IP
Print the post Back To Top
No. of Recommendations: 0
We were once handed a check to transfer on our own, told it was not a problem as long as we got it into another account within 60 days.

The transfer is tax free as long as you complete it within 60 days, but the usual problem with the check is the issuer usually deducts withholding tax.

You don't get the withholding back until tax time, but you must replace those funds in the transfer or the withholding amount becomes a penalty distribution.

That is why direct custodian to custodian transfers are usually preferred.
Print the post Back To Top
No. of Recommendations: 1
Indirect IRA rollovers do not have mandatory withholding by the custodian....while qualified retirement plans must withhold 20% and send to the IRS. If this happens, the IRA owner must redeposit the rollover within 60 days plus make up the 20% withholding out of their pocket. Any of this amount that is not deposited to an IRA or retirement plan within the 60 days, unless the reasons are beyond the control of the IRA owner, will be considered by the IRS to be a withdrawal and must be included as income and may be subject to a 10% penalty if not yet 59.5 or another of the exceptions to the penalty.

If you receive a rollover as a check, as long as the check is made out to the IRA of the owner, it will be considered a direct rollover and will not be subject to the 60 day rollover rule....although the actual check itself may require that it be deposited within 30 days, but that is a separate issue.

I've read of but have never seen anyone who does constant IRA rollovers as a way of accessing their IRA dollars without tax or penalty and who would be the ones most affected by this new rule. But it sounds like a lot of work.

BruceM
Print the post Back To Top
No. of Recommendations: 0
I've read of but have never seen anyone who does constant IRA rollovers as a way of accessing their IRA dollars without tax or penalty and who would be the ones most affected by this new rule. But it sounds like a lot of work.

It's not that hard.

I did this myself just a few months ago. Due to some unusual medical expenses, I needed a bit of extra cash to get through to this current tax season (I do taxes for a living and earn much of my income between February and April each year). I thought about just taking a distribution from my Roth IRA, but then realized that I could easily make it into March if I did a couple of 60 day rollovers.

We did one withdrawal from from my wife's IRA, paid the bills, did a withdrawal from my Roth about 50 days later and put that into my wife's IRA to complete her rollover, then I earned enough to put the money back into my Roth before that 60 days were up (only needed about 45 days, actually).

This new case wouldn't affect this as we each did only one rollover.

But I haven't heard any people thinking about traditional and Roth IRAs as being covered by this. The code section in question pre-dates Roth IRAs, so they are not mentioned there. Would your traditional IRA and your Roth IRA be considered one IRA for this rollover purpose? I don't know.

--Peter
Print the post Back To Top
No. of Recommendations: 0
Peter
From the IRS explanation of announcement 2014-15

"Beginning as early as January 1, 2015, you can make only one rollover from a traditional IRA to another (or the same) traditional IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15). A similar limitation will apply to rollovers between Roth IRAs."

http://www.irs.gov/Retirement-Plans/IRA-One-Rollover-Per-Yea...

This seems logical, as a rollover from a TIRA to a RIRA would be a conversion, which currently does not count as a rollover for purposes of the 12 month limitation rule. And a rollover the other way would simply be a RIRA withdrawal of basis and a subsequent TIRA contribution....not a rollover. So a rollover could only happen between the same type of IRA which should mean that they are treated separately.

Just being curious, but I wonder if the TIRA rollover limit will also apply to SEP and SIMPLE IRAs...as these are in every way, except annual contribution limits and the 2 year withdrawal limitation of a SIMPLE, Sec. 408(a) Traditional IRAs.

BruceM
Print the post Back To Top