Client broke once-per-year rollover rule – possible to unwind?

Submitted by Robert Vashko on Mon, 2023-04-03 16:19

IRA owner took two IRA-to-IRA 60-day rollovers in the same 12-month window.

I know the consequences on the second one – taxable distribution, 10% penalty if under 59.5, 6% excess contribution penalty if kept in the IRA.

Does the IRS provide any stated relief for a taxpayer to unwind the second rollover? A do-over, for lack of a better phrase?

Or once the second rollover is distributed to the client, is it a fait accompli, and the client just has to take their medicine?

Please and thank you.



Submitted by Alan - IRA critic on Mon, 2023-04-03 18:55

  • The latter. The IRS has never had the statutory authority to grant exceptions to the one rollover limit, and knowing that they still adopted the 2015 change by interpreting the rule as applying to per all like  kind IRA accounts instead of “Per account”. Still, the IRS seemingly makes no effort use 1099R and 5498 matching to detect these errors. Instead they rely on the very questionable ability of IRA custodians to administer this rule.  Most errors are not detected within 60 days, but for someone still within 60 days of the second distribution, the quick fix is to roll it to their 401k (if possible) or Plan B, to convert it to Roth. In the first case, tax and penalty is avoided, in the second case, just the penalty is avoided but the funds end up in a superior form of account. 
  • Natalie Choate article attached if you can get Morningstar.
  • How to Avoid This IRA-to-IRA Rollover Trap | Morningstar

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