The IRS just made what many experts are calling a surprise move.
Savers who miss a 60-day deadline for rolling over their IRA or workplace retirement savings plan, like a 401(k), are getting a second chance.
This comes as a relief to plan sponsors often facing issues with participants who, by accident, don’t get their rollover funds deposited timely. The 60-day limit has long posed painful and costly problems for participants and plan sponsors.
The IRS announced this taxpayer friendly change in Revenue Procedure 2016-47. The new process uses a very simple waiver form letter. The taxpayer “self-certifies” one or more of 11 events which qualify for a missed deadline. Sincere mistakes, financial institution errors, or major personal problems are the focus.
The events which qualify for relief are:
- Financial institution error in receiving or distributing the rollover,
- A misplaced or never cashed rollover check,
- The rollover was mistakenly put into and remained in an account that was not an eligible retirement plan,
- Principal residence was severely damaged,
- Death of a family member,
- Serious illness of a family member,
- Being in jail or prison,
- Restrictions on an account imposed by a foreign country,
- A postal error,
- An IRS levy (under §6331) where the funds were returned, and/or
- Distributing party delayed providing information needed by the receiving plan despite reasonable efforts to get the information.
To use the new waiver form letter, a taxpayer cannot have already been denied a waiver on the event. The relief is available to valid IRA rollovers (in other words a second IRA to IRA rollover in one year is not valid). And, keep a copy of the waiver form letter form in case of an audit by the IRS.
If you have questions about the new process and how it might affect you, please contact your Nyhart consultant.