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