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  • tara berks
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    Tax Topic 413

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    Refundtalk
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    Topic 413 – Rollovers from Retirement Plans
    A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan. This rollover transaction isn’t taxable, unless the rollover is to a Roth IRA, but it is reportable on your federal tax return. You must include the taxable amount of a distribution that you don’t roll over in income in the year of the distribution.

    Ineligible Distributions
    Certain distributions from an eligible retirement plan can’t be rolled over, including:

    Generally, the nontaxable part of a distribution, such as your after-tax contributions to a retirement plan,
    A distribution that’s one of a series of payments made for your life (or life expectancy), or the joint lives (or joint life expectancies) of you and your beneficiary, or made for a specified period of 10 years or more,
    A required minimum distribution,
    A hardship distribution,
    Dividends paid on employer securities, or
    The cost of life insurance coverage.
    Other exclusions exist for certain loans and corrective distributions.

    Timeframe to Complete a Rollover
    If a plan pays you an eligible rollover distribution, you have 60 days from the date you receive it to roll it over to another eligible retirement plan.

    If you’ve missed the 60-day deadline, you may still be able to complete a rollover by self-certifying that you qualify for a waiver of the 60-day requirement. For details, see Revenue Procedure 2016-47.

    IRA-to-IRA Rollover Limitation
    You can only make one rollover from an IRA to another (or the same) IRA in any one-year period, regardless of the number of IRAs you own. A trustee-to-trustee transfer isn’t a rollover and isn’t affected by this rule. This rule also doesn’t apply to you if you convert a traditional IRA to Roth IRA.

    Withholding
    Any taxable eligible rollover distribution paid to you from an employer-sponsored retirement plan is subject to a mandatory income tax withholding of 20%, even if you intend to roll it over later. If you do roll it over, and want to defer tax on the entire taxable portion, you’ll have to add funds from other sources equal to the amount withheld. You can choose instead a direct rollover, in which you have the payer transfer a distribution directly to another eligible retirement plan (including an IRA). The 20% mandatory withholding doesn’t apply in a direct rollover.

    Additional Taxes
    If you’re under age 59½ at the time of the distribution, any taxable portion not rolled over may be subject to an additional 10% tax on early distributions unless an exception applies. For a list of exceptions, refer to Topic 558. Certain distributions from a SIMPLE IRA will be subject to an additional 25% tax instead of the additional 10% tax. For more information on SIMPLE IRAs, refer to Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

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