Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.
[Under the new procedure] A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer’s home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.
Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the revenue procedure.
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posted: Aug. 24, 2016 @ 4:51p
In other words, if the reason for going over 60 days was beyond the taxpayer's control or honest mistake, the taxpayer could have gotten a waiver in the past, but now the IRS doesn't want to waste the man-hours issuing the waiver, so from now on state your reason and write your own waiver, if we don't like it we'll let you know.
Senior Member - 2K
posted: Aug. 24, 2016 @ 5:24p
taxmantoo said: In other words, if the reason for going over 60 days was beyond the taxpayer's control or honest mistake, the taxpayer could have gotten a waiver in the past, but now the IRS doesn't want to waste the man-hours issuing the waiver, so from now on state your reason and write your own waiver, if we don't like it we'll let you know. Um .. no. Prior to this procedure, relief had to be obtained from the IRS via the private letter ruling process. Not only did such involve a formal application, usually prepared by an accountant or attorney ($$ professional fees), it also involved payment of an IRS user fee, up to $3,000. See below (Rev. Proc. 2015-1).
(4) Certain waivers of 60-day rollover period
(a) Rollover less than $50,000
(b) Rollover equal to or greater than $50,000 and less than $100,000
(c) Rollover equal to or greater than $100,000
posted: Aug. 24, 2016 @ 7:39p
Oops, you're right, RP 2003-04 just laid out the circumstances for a successful letter ruling.
posted: Aug. 24, 2016 @ 9:52p
These new circumstances also seem much more broad (illness family member, etc). Actually I looked up the waiver requirements just two days ago.... Trying to convince a family member to replace the funds they withdrew earlier in the year with penalty.
related question that's unclear to me: are they allowed to only replace some of the withdrawn funds and still get back the penalty on that portion? Or is it all or nothing?
Edit: on second reading, seems to imply all the same rules. He's at ~6months after normal timeframe, not sure if it's reasonable to pursue.
Senior Member - 3K
posted: Aug. 25, 2016 @ 6:52a
I got a coworker whose 401k with former employer is 80k. She wants to roll it over to a traditional IRA with Schwab or Fidelity. Are therre any implications with this new rule?
Senior Member - 1K
posted: Aug. 25, 2016 @ 7:08a
jomarrod said: I got a coworker whose 401k with former employer is 80k. She wants to roll it over to a traditional IRA with Schwab or Fidelity. Are therre any implications with this new rule?
Does she plan on taking more than 60-days to do the rollover? if not.. no.
Senior Member - 1K
posted: Aug. 25, 2016 @ 4:35p
jomarrod said: I got a coworker whose 401k with former employer is 80k. She wants to roll it over to a traditional IRA with Schwab or Fidelity. Are therre any implications with this new rule? She should not be doing an indirect rollover anyway. She should be doing a direct trustee->trustee transfer between the former employer's 401k plan and the new IRA custodian.
This new procedure is just for unforeseen circumstances where someone exceeded the 60-day rule because of one of the 11 exceptions. This is not a new rule for doing rollovers. Rather it is a streamlined way of getting a waiver to the still current rule. Prior to this, it required a request for a Private Letter Ruling from the IRS. This required expensive IRS fees and costly legal service fees and a lengthy review process with no certainty of success. Now you can self-certify for the waiver. It certainly should be and is a rare circumstance.
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