What Constitutes 60 Day Rollover Run
A client recieved a lump sum distribution from a retirement account. The check was dated 4/03/13 and the client did not physically recieve the check until 3 weeks later on 4/24/13 with 20% witheld for mandatory income taxes. To qualify for the 60 day rollover rule which date constitues the start of that time period – the check date or the recieved date? What date would constitute the end date? The date he sent the check for deposit to his IRA, let’s say 6/13/13, or the date the check arrived in his IRA 6/20/13? Is there a special form that he can file with the IRS to state his case if he is outside the 60 days at this point? Just want to see if we can get him some of the wihholding back. Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2013-06-13 20:54
Both the beginning and the end dates are the received dates. Therefore, the IRA custodian must receive the rollover deposit by 6/23 to comply with the 60 day time limit. Client will have to replace the 20% withholding with other funds to have the entire distribution rolled over and tax free. But whether the rollover was completed in time of not, the only way to recover the dollars withheld is to file a tax return for the year. http://www.retirementdictionary.com/definitions/60dayrolloverrule
Permalink Submitted by Todd Martin on Thu, 2013-06-13 22:21
Thank you Alan. Let me change the scenario a bit. The client’s pension check was dated 4/03/13 and he recieved it on 4/24/13. Because he is under 59 1/2 his company automatically withheld 20% and sent it to the IRS on his behalf. We don’t know the date they sent the IRS their 20%. He rolled over his pension within the 60 day window and will get a portion of the 20% withholding back. At the time, he did not have capital to cover the full 20%. Recently, he came into enough money to put back the full amount of the withholding back which is over $15,000. Since the 20% went to the IRS, and we don’t know those dates, would the IRS base the 60 day rule on when he got the 80% of the distribution, 4/24/13, or they date the IRS recieved the 20% that was mailed from his company? Other than calling his company to discover when they mailed out the check, is there any other known way to discover when the IRS may have gotten the 20%? Sorry to complicate it but we are really close to the 60 day deadline. Thanks as always for your help and expertise.
Permalink Submitted by Alan - IRA critic on Thu, 2013-06-13 22:48
I have never seen this question addressed by IRS sources or by IRA experts. From a practical standpoint, if the client now has the money to replace some or all of the withholding, client would should use the receipt date of the 80% as the reciept date for the entire distribution. The IRS cannot complete a rollover so the day the IRS actually received the withholding is immaterial. In other words, client should not take the position that the IRS received the 20% AFTER client received the 80% and use that rationale to extend the 60 day deadline for replacing the withheld amount.
Permalink Submitted by Todd Martin on Thu, 2013-06-13 22:54
Thank you Alan. I wasn’t sure if we should use the date the client got the check or needed to know the exact date the IRS got the check. Since we don’t know the date the IRS got it, we will use your recommendation and use 4/24/13. Thank you again.