60 day Rollover Rule – Once per Calendar Year
I have a client who took money out of his IRA on 10/28/10 and put it back on 12/23/10 using the 60 Rollover Rule. He wants to take money out of it again this year. What date can he take it out this year and still comply with the once/calendar year 60 day rollover rule? Thanks.
Permalink Submitted by Alan Spross on Tue, 2011-08-30 19:49
Waiting period is 12 months from the date of the last DISTRIBUTION. Therefore, he can take another distribution eligible for 60 day rollover as of 10/29/2011.
The waiting period applies on a running basis. The actual calendar year is immaterial except that the IRS receives 1099R and 5498 forms on a calendar year basis.
Permalink Submitted by Julie Brangenberg on Tue, 2011-08-30 20:43
What does this mean, “The waiting period applies on a running basis.The actual calendar year is immaterial except that the IRS receives 1099R and 5498 forms on a calendar year basis.” Does it change the game?
Permalink Submitted by Alan Spross on Tue, 2011-08-30 22:02
No.
A client just needs to wait that 12 months no matter what time of year they take the first distribution that is rolled over. For example, if the first distribution is in December they have to wait 12 months to do the next one, not just one month to get into the next calendar year.
Enforcement of this rule is mostly at the IRA custodian level because the IRS does not know the actual date of any distribution or rollover contribution from the 1099R system. If someone tried to do rollovers just a couple months apart, the custodian might disallow the second one to be rolled over, but that does not stop the taxpayer from rolling it to another IRA account with another custodian who does not know about the earlier rollover. The first custodian does not issue a separate 1099R for each distribution, they just add up all the distributions for the year and put the total on the 1099R. For example, one distribution of 10,000 looks exactly the same as 5 distributions of 2,000 each, ie the total is 10,000. If the custodian does not catch rollover violations, the only way the IRS would do so is by audit to determine actual dates and amounts.
Permalink Submitted by scott g on Thu, 2011-09-01 21:23
In your example you state that the first year rollover commences on 10/28 and the next year rollover must commence on 10/29, the rule says one year, not one year plus a day. Why do you assume that 10/28-10/27 of the next year does not equal a full year?
Permalink Submitted by Alan Spross on Thu, 2011-09-01 22:58
I don’t assume that it ends on 10/28 and agree that it should end on 10/27, the date the year is completed, and therefore a new rollover distribution should be OK if issued on the exact anniversary of the prior distribution. However, since there is no specific citation to define the end date I always add a day for safety in case the IRS, a custodian or anyone else comes up with a different interpretation.