Missing the 60-day deadline to complete a rollover of money from a retirement account is an all-too-common mistake. If you meet certain requirements, there’s a simple procedure to correct the problem.
Did you miss the 60-day deadline for completing a retirement account rollover? You can avoid the potentially costly tax consequences if you missed the deadline for any of the following reasons (quoted from Rev. Proc. 2016-47):
- an error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;
- the distribution, having been made in the form of a check, was misplaced and never cashed;
- the distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan;
- the taxpayer’s principal residence was severely damaged;
- a member of the taxpayer’s family died;
- the taxpayer or a member of the taxpayer’s family was seriously ill;
- the taxpayer was incarcerated;
- restrictions were imposed by a foreign country;
- a postal error occurred;
- the distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; or
- 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.
That’s a pretty generous list. If you fall into any of those categories, you’re eligible for relief from the 60-day limit.
WHAT YOU NEED TO DO
You need to do two things. First, complete the rollover “as soon as practicable” after the reason for missing the deadline no longer exists. This requirement is “deemed satisfied” if you act within 30 days after the reason for missing the deadline no longer exists.
And second, you need to provide a letter to the plan administrator or IRA trustee where you are completing the rollover, certifying that you meet the requirements for a waiver of the 60-day limit. The form letter provided by the IRS for this purpose appears below as a downloadable Word document.
What happens then?
Unless the plan administrator or IRA trustee has actual knowledge that your certification is false, they’ll accept your rollover, even though it’s late. On your tax return, you’ll report the transfer as a valid rollover. In most cases that will be the end of the story. You don’t have to notify the IRS or obtain confirmation from them that they accept your excuse for missing the deadline.
Be aware, however, that this procedure does not result in an automatic waiver. As part of their information reporting, the plan administrator or IRA trustee will let the IRS know this was a late rollover. If the IRS examines your return and determines that you didn’t meet the requirements for a waiver, they may declare your rollover invalid. In that case you would owe tax and possibly penalties as well. Be sure to keep in your records a copy of the certification letter, together with any documentation you may have supporting the reason claimed for missing the deadline.
Form letter for self-certification
The IRS provided the following letter for use in certifying to the plan administrator or IRA trustee that you meet the requirements for a waiver of the 60-day limit. Use the link below to download it in Word format.