Advanced Underwriting Consultants

Question of the Day – April 4

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 received a distribution from one IRA on February 10, and she wants to roll it over to another IRA this month.  It’ll be close to the 60 day deadline.  If she sends the money with a new IRA custodian on April 9, will she be within the rules?

Answer: Probably not.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) of the Code does not apply to any amount paid or distributed out of an IRA to the individual for whose benefit the IRA is maintained if:

(i) the entire amount received (including money and any other property) is paid into an IRA for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution

The statute clearly says that the 60 day timetable starts when the money is received by the taxpayer.  The 60 day deadline, according to the language of the statute, is for the taxpayer to transfer the distribution into the IRA.

At least one financial website says that the transfer must be complete by the end of 60 days.  That probably means that simply sending the check to the new custodian before the end of 60 days is not sufficient.  The check must actually be deposited into the IRA before 60 days expires.

The IRS seems to agree.  However, they say that they will grant an automatic extension to the 60 day rollover deadline under these circumstances:

1. Are there any automatic waivers of the 60-day rollover period?

The IRS waives the 60-day rollover requirement automatically only if all of the following apply:

  • The financial institution receives the funds on your behalf before the end of the 60-day rollover period.

  • You followed all the procedures set by the financial institution for depositing the funds into an eligible retirement plan within the 60-day period (including giving instructions to deposit the funds into an eligible retirement plan).

  • The funds are not deposited into an eligible retirement plan within the 60-day rollover period solely because of an error on the part of the financial institution.

  • The funds are deposited into an eligible retirement plan within 1 year from the beginning of the 60-day rollover period.

  • It would have been a valid rollover if the financial institution had deposited the funds as instructed.

If you do not qualify for an automatic waiver, you can apply to the IRS for a waiver of the 60-day rollover requirement.

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.