If I miss the 60-day deadline for completing an IRA rollover, is there any way to save the rollover amount from tax?
Failing to complete a 60-day rollover on time can cause the rollover amount to be taxed as income and perhaps subject to a 10% early withdrawal penalty. However, the deadline may have been missed due to reasons that are not the taxpayer’s fault. Fortunately, for such cases, the IRS has created an easy, low-cost way to fix late rollover errors. Revenue Procedure 2016-47 enables individuals to self-certify that they are eligible for a waiver of the 60-day deadline and complete a late rollover.
1. Double check the status of every rollover you attempt. Don’t assume one has been
completed just because you did your part. Mistakes happen. You can’t correct a mistake you
don’t know about, and a delay hurts your case with the IRS.
2. See if the reason that your rollover wasn’t completed within 60 days is on the list of 12
circumstances the IRS says may justify a waiver. Examples: financial institution mistake,
postal error, death in the family. For a complete list and a copy of the IRS’ sample letter, visit:
https://www.irs.gov/pub/irs-drop/rp-16-47.pdf
3. If the reason for the delay is listed, write a self-certification letter and send it to the
administrator or trustee of the employer plan or IRA that is receiving the rollover. Don’t
send it to the IRS. The IRS provides a model letter in the Revenue Procedure, and requires that
it be followed on a “word-for-word basis or by using a letter that is substantially similar in all
material respects.”
4. Complete the late rollover as soon as possible after the problem that caused the delay is
remedied. The IRS provides a “safe harbor” period of 30 days that it deems acceptable.
5. Prepare to be audited. The IRS will know of the late rollover because it will be reported on
Form 5498 by the financial institution receiving it. In the Revenue Procedure, it says “a copy of
the certification should be kept in the taxpayer’s files and be available if requested on audit.”
After an audit, the IRS may still deem you ineligible for a wavier. You may or may not be audited,
but remember the high stakes and be ready to justify your position if you are.
Advisory services offered through CreativeOne Wealth, LLC a Registered Investment Adviser. CreativeOne Wealth, LLC and Oliver Asset Management are unaffiliated entities.
Licensed Insurance Professional. Respond and learn how financial products, including life insurance and annuities can be used in various planning strategies for retirement. The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional tax advice for applicability to your personal situation.
*Testimonials are based on unique experiences from current clients and are not representative of all client experiences. Testimonials are unsolicited and clients received no compensation (cash or non-cash). Past performance is no guarantee of future results. Testimonials are encouraged and welcomed from all prospects and clients. Investment advisory services offered through CreativeOne Wealth, LLC, a registered investment advisor. CreativeOne Wealth is not affiliated with Oliver Asset Management. Additional information about CreativeOne Wealth, LLC is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC’s Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using CRD #281213.
Oliver Asset Management © 2023