Can I combine Traditional IRA with SEP IRA?
Last week I called my financial institution to send me 2 seperate checks for my traditional IRA and SEP IRA accounts and told them to close the accounts. My plan was to send these checks to my new financial institution where I already opened a traditional IRA and a SEP IRA account seperately.
When I called my new financial institution they said I can not do that because there is a 1 IRA transfer per year rule. They also said I should have combined Traditional IRA account and SEP IRA account because as far as IRS is concerned they are same type of retirement accounts and that I should have told my old financial institution to cut only 1 check then everything would be fine
I called my old financial institution they said the accounts are already closed they can not do that
So what can I do now?
Permalink Submitted by David Mertz on Fri, 2021-03-19 12:24
If the checks from the old IRAs were made out to your new IRA, these would have been non-reportable trustee-to-trustee transfers, neither a distribution nor a rollover, and the one rollover per year rule would not apply. However, checks made out you personally constitute distributions and, as you discovered, only one IRA distribution made within a one-year period is permitted to be rolled over to another traditional IRA.
Your options to keep the other distribution in a qualified retirement account would be to roll that one over taxably to a Roth IRA or roll it over to a qualified retirement plan like a 401(k). Rollovers to either of these destinations are disregarded with respect to the one rollover per year rule. If you roll it over to a Roth IRA, since that rollover will be taxable you might want to do that with the smaller of the two distributions and roll the larger distribution over to the new traditional or SEP IRA (or a combination of the two; the limitation is on the number of distributions rolled over, not on the number of rollover contributions made from a single distribution).