Clarification Of IRA Rollover Limitation Rule

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  • #2484
    kaneohe
    Participant

    “you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period”

    Does this 12-month period follow the Medicare 12 mo.rule?
    For Medicare, I can get the Wellness exam in November one yr and then
    again in November the next yr , regardless of the date…..so the 12 mo
    period is Nov.1 to Oct 31 in this case. …..I can do it Nov.15 this yr
    and earlier Nov 5 next yr and still be ok.

    #2486
    Alan S.
    Participant

    Kaneohe, the one rollover rule is measured irrespective of calendar year. The 12 months starts on the day the distribution rolled over (any part of it) was received and because it counts the received date, the last day of the 12 month waiting period to take another distribution to be rolled over is the date before the 1 year anniversary. Pub 590 A has an example where the first distribution is received on 1/1/2018. The last day of the waiting period would be 12/31/2018, so the first day the next distribution to be rolled over could be received would be 1/1/2019. The date of any of the rollover contributions is immaterial with respect to the one rollover limit, but NOT immaterial with respect to the 60 day deadline.

    If someone messes up and receives a second distribution before the waiting period is up, there is some damage control in converting the second distribution. A conversion has 3 advantages over a taxable distribution – the 10% penalty is avoided, your total tax deferred IRA balance remains the same, and the Roth increase provides a higher quality IRA type than a TIRA. This is of course possible because a conversion does not count against the one rollover limit.

    #2489
    kaneohe
    Participant

    Thanks, Alan………so it seems the IRA rule is less tolerant than the Medicare rule………the IRA rule is more like what I would call a 365 day rule tho I guess there is some fuzziness since it depends on when you receive the funds , not when they are removed from account.

    #2490
    Alan S.
    Participant

    Yes. I think the IRS probably recognizes a small grace period since only the distribution date is provable. Receipt time is affected by the PO, weekends, holidays and even delays in actual mailing a processed distribution at the custodian end. But if the IRA owner is on vacation, the concept of constructive receipt of a check would apply, ie the first day the IRA would have had access to the check. Of course, for transfers from the custodian to a bank checking account, the receipt date would be the day the deposit is posted to the account.

    On the other hand, QCDs and RMDs are considered completed on the distribution date, not the received date, although a QCD also needs to be forwarded to the charity before year end, preferably received by the charity.

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