09.07.2016 IRS Permits Several Waivers for Taxpayers Who Miss Rollover Deadline By: Brydon M. DeWitt

The Internal Revenue Service has offered some reprieve to individuals who receive a distribution from a retirement plan or an individual retirement arrangement (IRA) and inadvertently miss the 60-day time limit for rolling these amounts into another retirement plan or IRA.  

Normally, an eligible distribution from an IRA or an employer’s 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.

A taxpayer who missed the 60-day deadline can qualify for a waiver if the IRS has not previously denied a waiver for the rollover and one or more of the following 11 circumstances apply to them.

  • An error was committed by the financial institution making the distribution or  receiving the contribution.
  • The distribution was in the form of a check, and the check was misplaced and never cashed.
  • The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was a retirement plan or IRA.
  • The taxpayer’s principal residence was severely damaged.
  • One of the taxpayer’s family members died.
  • The taxpayer or one of the taxpayer’s family members was seriously ill.
  • The taxpayer was incarcerated.
  • Restrictions were imposed by a foreign country.
  • A postal error occurred.
  • The distribution was made on account of an IRS levy, and the proceeds of the levy have been returned to the taxpayer.
  • The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.

”The dog ate my rollover check” is not one of the mitigating circumstances listed by the IRS, but may qualify as a “misplaced check.” 

To be eligible for the self-correction described in Revenue Procedure 2016-47, the taxpayer must make a written certification to the plan administrator or IRA trustee that the contribution satisfies criteria listed in the Revenue Procedure.  The contribution also must be made to the plan or IRA as soon as practicable after the mitigating circumstance is resolved.

The IRS provided a sample letter for taxpayers to use for written certification.  The sample letter is available here

In the course of examining taxpayer’s individual return, the IRS may determine that the taxpayer qualified for a waiver of the 60-day rollover requirement.