IRA Rollover

Submitted by Ross Cote on Sat, 2007-08-04 12:51

Just found out about the 12 month rule after the fact and need help.

My IRA was in a CD that matured in April 2007 and the renewal rate was lower that I had been receiving. Also, I wanted to split the IRA into 2 institutions. but no one at the bank mentioned to me about the 12 month rule. So when the CD matured they put the funds into my checking account. I immediately wrote 2 checks and deposited them into new IRA accounts at a bank and a brokerage account on the same day. By accident, I just found out about the 12 month rule.

Is there anything I can do now to correct this?

Thank you.



Submitted by Alan Spross on Sat, 2007-08-04 17:25

The information you posted does not constitute a violation, because you only have one rollover distribution from the CD IRA. Splitting the funds into two IRAs does not make for two rollovers. However, for the next 12 months, you cannot roll over any amount from either of the two new IRA accounts, and I assume the original IRA is closed.

You also have to look back 12 months to be sure that you did not do a prior rollover from or into that CD IRA, or that would make your current rollover a second one and a violation. If you are clear on this count, then you do not have a present violation.

If you need to move these funds again within 12 months, be sure to only do it by direct trustee transfer.

Submitted by Ross Cote on Sat, 2007-08-04 19:37

Thank you Alan for your reply. Yes, the original IRA was closed and the entire amount transferred to the two new accounts. The original IRA was a 5 year CD. Is there any IRS publication that spells out what I did. In looking on the internet, I was convinced that I had really blown it.

The irony of it is that I found out about the 12 month rule when I was asking about transferring my brokerage account which hasn’t done too well. Can I transfer it by doing direct trustee transfer as you recommended?

Thanks again.

Submitted by Alan Spross on Sat, 2007-08-04 20:45

Yes, the rollover rules are in Pub 590, p 24, “Waiting Period between Rollovers”.

There is no limit on the number of direct transfers you can make per Pub 590, p 23. They do not count as rollovers because you never actually have access to the funds.

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