When a person misses the IRA 60 day deadline to rollover money from either an IRA or qualified plan, the penalties and taxes can be debilitating. On the other hand, the procedure to get a waiver from the IRS can be time consuming and costly. Plan administrators are in a difficult position if participants try to rollover money into their plan if the proceeds were distributed more than 60 days before. Effective August 24, 2016, the IRS will allow investors that missed the deadline under certain conditions to avoid penalties and taxes under a self-certification process.
If there were no previous denials of waivers by the IRS, reasons that the IRS would accept for a missed deadline include:
- an error was committed by the financial institution receiving the contribution or making the distribution;
- the distribution was made in the form of a check which was misplaced and never cashed;
- the distribution was deposited into and remained in an account that the recipient mistakenly thought was an eligible retirement plan;
- the recipient’s principal residence was severely damaged;
- a member of the recipient’s family died;
- the recipient or a member of the recipient’s family was seriously ill;
- the recipient was incarcerated;
- restrictions were imposed by a foreign country;
- a postal error occurred;
- the distribution was made on account of a levy and the proceeds of the levy have been returned to the recipient; or
- the person making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the recipient’s reasonable efforts to obtain the information.
There must be a model letter used which the plan administrator may rely upon to accept the rollover proceeds
The waiver is not binding on the IRS if:
- The self-certification contained a material misstatement.
- The reason(s) claimed for missing the 60-day deadline did not prevent the recipient from completing a rollover within 60 days of receipt.
The recipient failed to make the contribution as soon as practicable after the reason(s) no longer prevented the recipient from making the contribution.
