Advanced Underwriting Consultants

Question of the Day – October 23

Ask the Experts!

Here’s the question of the day.

Question:  My client tried to roll over his IRA within the 60 day rollover period, but through no fault of his own failed to complete the transaction within the allotted time.  Is relief available?

Answer:  Maybe.

Revenue Procedure 2003-16 allows the IRS to grant relief in situations where the taxpayer has inadvertently failed to properly roll over qualified funds within the 60 day window.

The Service will issue a ruling waiving the 60-day rollover requirement in cases where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster or other events beyond the reasonable control of the taxpayer. In determining whether to grant a waiver, the Service will consider all relevant facts and circumstances, including: (1) errors committed by a financial institution, other than as described in Section 3.03 below; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3) the use of the amount distributed (for example, in the case of payment by check, whether the check was cashed); and (4) the time elapsed since the distribution occurred.

The Service also gives financial institutions the automatic power to accept 60-day rollovers in certain circumstances, even if the rollover is technically outside the time in which the rollover would be allowed.

No application to the Service is required if a financial institution receives funds on behalf of a taxpayer prior to the expiration of the 60-day rollover period, the taxpayer follows all procedures required 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) and, solely due to an error on the part of the financial institution, the funds are not deposited into an eligible retirement plan within the 60-day rollover period. Automatic approval is granted only: (1) if the funds are deposited into an eligible retirement plan within 1 year from the beginning of the 60-day rollover period; and (2) if the financial institution had deposited the funds as instructed, it would have been a valid rollover.

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