IRA Rollover Rule regarding one per year

Submitted by Marion Woodyard on Thu, 2013-08-01 19:07

I was not aware of the IRS rule that only one rollover can be done within a year out of a given traditional IRA account. I have done two. Efforts to deal with the original brokerage firm holding the IRA and with the banks they were rolled into have been unsuccessful in resolving this problem. I seem to be facing paying taxes on a large sum for the second rollover. In both cases I took possession of a check made out to me and made the deposit to new traditional IRA’s within a week.

Discussions with a CPA have so far not shown any options. Are there any steps we can take to make the second IRA rollover either legitimate or like it did not occur? Or do we have recourse in some fashion with the IRS to treat this in such a fashion that taxes are not due? Even a conversion of the second one to a Roth IRA would be attractive to me, but that has not seemed possible either.

I understand there is such a thing as a Private Letter Ruling with the IRS. Is there any precedent here with the issue I have? Is such an approach with the IRS likely to be successful?

Any help you can provide would be really appreciated. I have learned much reading Mr. Slott’s books some years ago, but this one eluded me.



Submitted by Alan - IRA critic on Thu, 2013-08-01 22:03

  • There is no solution once both rollover contributions are completed. My understanding is that the IRS does not have the authority to allow multiple rollovers as they do to extend the 60 day time limit, so a PLR would be a waste of time and money. If the second rollover was larger than the first, you could retain the second one, not report the first one as a rollover and request removal of the first one as an excess IRA contribution. That way only the first rollover will be taxable along with any earnings generated on that first rollover before you withdrew that amount.
  • This is why it is always recommended to move funds by direct transfer wherever possible, as it saves your one rollover for emergencies. To avoid further problems note that you must also wait 12 months before doing an indirect rollover from the IRA account that received your rollover.
  • Also. you will only receive one 1099R from the brokerage holding the original IRA and that 1099R will show the total amount distributed during the year. That brokerage does not know that you rolled over any of the distributions, and the receiving bank is probably unaware of this rule and will generally not care about the source account for the rollover contributions.

Submitted by Marion Woodyard on Fri, 2013-08-02 00:21

Thanks.  Not the answer I wanted to hear, but I am not surprised.  Following on my earlier question, I also did a third distribution from the same traditional IRA, but still have the check uncashed and undeposited.  I realized the once per year limit before cashing the check.  Now I intend instead to do a Roth conversion with it, possibly choosing later to recharacterize part or all of it to keep income from going too high this year.  As I understand there are no limits on how many Roth conversions can be done in a year, and that just because I have used up my rollover for a traditional to traditional rollover, that does not limit the Roth conversion.  The brokerage house holding the original IRA account says they will do this for me.   Am I on solid ground if I go ahead with this?  Is this an OK thing to do.Thaniks again for any help you can offer.

Submitted by Alan - IRA critic on Fri, 2013-08-02 02:57

Yes, you are OK to convert the 3rd distribution within 60 days of receipt, and if you choose to recharacterize the conversion it will be OK. Neither conversions or recharacterizations count toward the one rollover rule. I would have mentioned this before but you did not mention a 3rd distribution that had not yet been rolled over. Note that this will not work with the earlier distributions because you have already rolled them over.

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