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IRS Provides Relief for Certain Savers Who Miss Rollover Deadline

The new provision can help people who missed the deadline due to error, illness or other reasons.

On Aug. 24, 2016, the Internal Revenue Service (IRS) provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or IRA.

By law, money received by a taxpayer from a 401(k), IRA or other workplace retirement plan must be contributed (i.e., rolled over) to another retirement account within 60 days to avoid immediate taxation. Otherwise, it is considered a distribution subject to regular taxes and, if the taxpayer is under age 59½, a possible 10% early withdrawal penalty. Prior to the IRS announcement, the only way to get relief from the 60-day rollover requirement was to apply to the IRS for what’s known as a private letter ruling, an expensive remedy (there’s a $10,000 filing fee, not counting the fee paid to an accountant or tax advisor to prepare the ruling request) that takes several months to process.

Find out who qualifies, how to apply for relief and more.

Jon Vogler is a senior analyst, retirement research, at Invesco Consulting.

Invesco Distributors, Inc. 11/16