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New Ruling – Retirement Rollover Checks

by Matt Crisafulli, EA, CFP®

Last week, the Internal Revenue Service issued a ruling that allows for a waiver of the rule that requires any retirement plan or IRA rollover checks be deposited in the new destination account within 60-days. The original rule required recipients of IRA or Retirement Plans (401k, 403b, etc.) rollover checks to deposit the funds into a new retirement account within 60-days, or face early distribution penalty and taxes.

The new ruling allows for a Waiver to the 60-day rule for any of the following reasons:

  • 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 I mistakenly thought was a retirement plan or IRA.
  • My principal residence was severely damaged.
  • One of my family members died.
  • I or one of my family members was seriously ill.
  • I 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 me.
  • The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite my reasonable efforts to obtain the information.

The IRS still requires that rollover checks be deposited in the new account in a timely manner, but this waiver provides a lot of leeway for missed rollover deposits.

Taxpayers who have missed their rollover window should consult with their tax preparers to determine if they qualify for the waiver of the 60 day rule and what steps they need to take to ensure their waiver is accepted to avoid excess taxes and penalties.

Link to Ruling: https://www.irs.gov/pub/irs-drop/rp-16-47.pdf