In Revenue Procedure 2016-47 issued August 24, 2016, the IRS has given taxpayers who miss the 60-day rollover deadline for IRA or retirement plan benefits another chance. Effective immediately, taxpayers can rollover benefits after the 60 days if they meet one of the 11 “acceptable” reasons listed in the Rev. Proc.:
1. An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;
2. The distribution, having been made in the form of a check, was misplaced and never cashed;
3. The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan;
4. The taxpayer’s principal residence was severely damaged;
5. A member of the taxpayer’s family died;
6. The taxpayer or a member of the taxpayer’s family was seriously ill;
7. The taxpayer was incarcerated;
8. Restrictions were imposed by a foreign country;
9. A postal error occurred;
10. The distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; or
11. The party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover, despite the taxpayer’s reasonable efforts to obtain the information.
Rev. Proc. 2016-47 is significant. Mistakes outside of the taxpayer’s control — such as a financial institution missing the deadline or putting the rollover money in a non-qualified account — will no longer penalize the taxpayer. Prior to this ruling, the taxpayer had to file a private letter ruling for relief, which is very expensive. Now, the taxpayer can simply send a letter to their IRA trustee or plan administrator and the IRA or plan can accept the rollover after the 60-day deadline. However, keep in mind the contribution must be made as soon as practicable, which the Rev. Proc. states would be 30 days after the reason the deadline was missed is no longer an issue.
Contact Phil Baptiste at email@example.com or a member of your service team for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.