If you own an IRA and are considering any type of rollover, you want to be aware of the new IRS ‘One per 12 Month IRA rollover rule’. As you may know, the tax code allows an individual to take a distribution from his or her IRA account and avoid the tax and early distribution penalties if the distribution is deposited to an IRA account owned by the taxpayer within 60 days of receiving the distribution.
Prior to 2015, the IRS allowed one rollover per every IRA account every 12 months. However, as a result of a tax court case, the rule was changed to ONE rollover per 12 month period. The one-per-12-month-period rollover rule also applies to Simplified Employer Pension Plans (SEPs) and SIMPLE plans.
If you are one to read through the IRS guidance documents, be aware that this more restrictive position has not yet been incorporated into the published 2015 guidance but the IRS is in the process of updating its documents to indicate this change.
On a side note, guidance provided by the IRS in their publications is not citable, carries no weight in audit or court, and only represents the IRS’ interpretation of tax law. It is best to keep this in mind if you use these publications as a resource.
There are a couple of points to make note of in this transition year.
* The IRS indicated it would not count a distribution taken in 2014 and rolled over in 2015 (within the 60-day limit) as a 2015 rollover.
* Traditional to Roth IRA conversions or trustee-to-trustee IRA transfers where the funds are directly transferred from one IRA trustee to another are not counted towards the one-per-12-month rule.
If you are planning an IRA distribution and subsequent rollover and are not positive it falls within the one-per-12-month limit, please give me a call.