Advanced Underwriting Consultants

Question of the Day – April 13

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client rolled over money from his 401(k) plan to an IRA earlier this year, and now wants to roll over money from that IRA to a new IRA a few months later.  Aren’t rollovers limited to one per year?

Answer: Not in this case.

IRS Publication 590 explains how the one rollover per year rule works:

Waiting period between rollovers. Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.

The rule applies to IRA to IRA rollovers only, so the rollover from a 401(k) plan to the IRA doesn’t count.

Also, the rule only applies to 60 day rollovers.  A taxpayer can make as many direct rollovers—direct transfers from one IRA custodian to another—as the taxpayer would like in a one year period.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.