IRS creates self-correction procedure for missed retirement plan rollovers

The IRS has created a self-correction procedure (Rev. Proc. 2016-47) designed to help recipients of missed retirement plan rollovers retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling over the distributions into another retirement plan or IRA.

The revenue procedure explains how eligible taxpayers who face various mitigating circumstances can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that the taxpayer qualifies for the waiver.

Normally, an eligible distribution from an IRA or an employer retirement plan can qualify for tax-free rollover treatment only if it is contributed to another IRA or employer plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could obtain a waiver only by requesting a private letter ruling from the IRS. Taxpayers 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. Circumstances include a misplaced distribution check that was never cashed, severe damage to the taxpayer’s home, the death of a family member, the serious illness of the taxpayer or a family member, the taxpayer’s incarceration and restrictions imposed by a foreign country.  

Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification for a waiver under these circumstances. Even if a taxpayer doesn’t self-certify, the IRS is now authorized to grant a waiver during a subsequent examination.

Contact Eddie Adkins
Partner, Washington National Tax Office
T +1 202 521 1565

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