60 Day IRA Rollover Rules

If you want to transfer funds between traditional IRAs or other tax-deferred retirement accounts through a tax-free rollover transaction, the Internal Revenue Service gives you a limited time to complete the rollover. The time limit applies if you have the rollover funds paid to you rather than transferred directly into the receiving account.

60-Day Rule

The IRS requires you to complete the rollover within 60 days of the date you receive the distribution from the tax-deferred plan you are taking the money out of. If you fail to deposit the rollover funds into the receiving account within 60 days, the distribution becomes taxable income and may also be subject to a 10 percent early withdrawal penalty.

Waiver Possible

The IRS may grant a waiver or extension of the 60-day rollover time limit if you missed the deadline because of circumstances beyond your control. You must petition the IRS for a waiver. For example, the IRS will grant a deadline waiver if the financial institution on the receiving end of the rollover failed to register your rollover deposit by the deadline. It may also grant a waiver if you failed to complete the rollover on time because of disability, hospitalization, postal error or other extenuating circumstance.

Bankruptcy Extension

The IRS may extend the 60-day rollover deadline if your deposit became frozen because your financial institution went bankrupt or the state suspended withdrawals because of impending insolvency. The time your rollover money is frozen won't be counted in the rollover period.

Withholding Rule

If you have the rollover funds paid to you rather than transferred directly into the receiving retirement account, the payer must withhold 20 percent for income taxes. To avoid owing tax and penalties on the amount withheld from your rollover, you must replace this money with funds from other sources within the 60-day period.

About the Author

Herb Kirchhoff has more than three decades of hands-on experience as an avid garden hobbyist and home handyman. Since retiring from the news business in 2008, Kirchhoff takes care of a 12-acre rural Michigan lakefront property and applies his experience to his vegetable and flower gardens and home repair and renovation projects.

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