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IRA Rollover Relief from the IRS

December 10, 2016

An a ruling issued by the IRS in August, taxpayers who do not complete an IRA or 401(k) rollover within the required 60 days qualify for relief if they can substantiate good cause and submit their acceptable reason for the delay to the new custodian of the account. Some of the stated acceptable reasons include:


(a) an error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;


(b) the distribution, having been made in the form of a check, was misplaced and never cashed;


(c) the distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan;


(d) the taxpayer’s principal residence was severely damaged;


(e) a member of the taxpayer’s family died;


(f) the taxpayer or a member of the taxpayer’s family was seriously ill;


(g) the taxpayer was incarcerated;


(h) restrictions were imposed by a foreign country;


(i) a postal error occurred;


(j) the distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; or


(k) the party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.


I will point out that the dog ate the rollover check isn’t stated on the list, and I probably wouldn’t rely on that as an audit defense. The ruling goes on to state that you should keep a copy of the certification you provide to the custodian, and that a significant misstatement on the form doesn’t preclude them from voiding the missed rollover.


At the end of the day, sometimes things happen when you have to do a rollover and not a transfer, but its good to know the IRS isn’t holding an iron fist to taxpayers when hardship beyond their control happens. If you find yourself in this situation, you should reach out to Woods Financial Services for assistance in the certification process.

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