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An Easier, Cheaper 60 Day Rollover Waiver

The IRS has had a major change of heart that is good for taxpayers. They recently issued Revenue Procedure 2016-47 which established a “self-certification” procedure enabling a taxpayer to complete a retirement plan rollover (despite missing the 60-day deadline) by certifying to the administrator of the recipient plan or IRA that the deadline was missed for certain specified reasons.

Generally, a distribution from a retirement plan is taxable, but if you roll the distribution over within 60 days into the same or another retirement plan, it is not taxable. Of course, this is the general rule. Some distributions do not qualify for roll-over and some recipients are not eligible to make roll-over distributions, so be sure to consult your tax advisor to determine if this Revenue Procedure applies to you.

Prior to this revenue procedure, you could get a waiver of the 60-day rollover deadline by filing with the IRS, paying a $10,000 filing fee and waiting a year or more to get an answer. So now if you fit into the common “hardship waiver” situations listed below, you can avoid the filing fee and the wait. If you received a plan distribution, but you have not completed the rollover of that distribution within 60 days, you can make the rollover late, provided you can “certify” to the plan administrator of the plan you are rolling over to that you qualify for a waiver of the 60 day deadline. The plan administrator can rely on your self-certification and accept the rollover. Good news – this Revenue Procedure even includes a sample letter you can use for the certification.

There are 3 requirements or conditions that must be met to qualify for the self-certification:

  • First, you must not have been previously denied a waiver by the IRS for this particular distribution
  • Second, you must have been unable to complete the rollover due to one or more of the 11 reasons in the following list
  • Third, you must complete the rollover as soon as practicable after the reason(s) that prevented you from completing the rollover no longer exist

Completing the rollover within 30 days after the “reasons no longer prevent you” will automatically be deemed to comply with condition number three above.

Common hardship waiver reasons based on the self-certification procedure:

  1. An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates.
  2. The distribution was made in the form of a check which was misplaced and never cashed.
  3. The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan.
  4. The taxpayer’s principal residence was severely damaged.
  5. A member of the taxpayer’s family died.
  6. The taxpayer or a member of the taxpayer’s family was seriously ill.
  7. The taxpayer was incarcerated.
  8. Restrictions imposed by a foreign country.
  9. Postal error.
  10. The distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer.
  11. 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.

Pamela Wheeler, EA