SECURE 2.0 Act – IRC 4973 IRA excise tax penalty limitations period changes

Submitted by Jonathan Williamson on Mon, 2023-01-02 16:25

The SECURE 2.0 Act introduces statutes of limitations changes for excise taxes on IRA overcontributions, imposed by IRC 4973.

We know that “deemed” RMDs cannot be rolled over even ignoring the excise tax.

Would that be the same for IRA overcontributions? As in, after the limitations period of six years is done, would a rollover be valid? Would it be different for a trustee-to-trustee transfer versus a rollover?



Submitted by Jonathan Williamson on Mon, 2023-01-02 16:29

Thinking of which, is a trustee-to-trustee transfer out of an IRA with “certain accumulations” for untaken RMDs an invalid rollover?

Submitted by Alan - IRA critic on Mon, 2023-01-02 17:16

  • A direct transfer is not a distribution, so has no effect on RMD compliance or excess contributions, although it makes it more difficult to correct an excess contribution.
  • Regarding excess contributions, after the SOL ends for a year due to the new rules for filing Form 1040 or Form 5329 in the past, any former undistributed excess is essentially erased. An excess contribution in a plan (but not a returned excess contribution from a plan) is eligible for rollover, unlike accumulated RMDs in a plan. But since the excess remains until the SOL ends or it is corrected, the annual 6% excise taxes plus interest continue to accrue.

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