Tax Tip
IRS Reinterprets the Once-Per-Year IRA Rollover Limitation
There is a tax rule that allows taxpayers to take money
out of their IRA and avoid paying income tax and the 10% early distribution
penalty so long as they return that money to their IRA account within 60 days.
However, tax law limits the number of rollovers to one
per year. In the past, the IRS has taken a liberal view toward the one-per-year
limitation by allowing one rollover per IRA account each year. In other words,
if you have three separate IRA accounts, you can apply the 60-day rollover rule
to each IRA account.
However, a recent Tax Court Case ruled that the
once-per-year rollover applied to the aggregate of all of the taxpayer’s IRA
accounts, meaning all of a taxpayer’s IRAs are treated as one for the purposes
of applying the once-per-year rollover limitation.
The IRS has announced it will adopt the Tax Court’s
ruling, meaning that an individual cannot make an IRA-to-IRA rollover if he or
she made such a rollover involving any of individual IRAs in the preceding
one-year period.
Since both the IRS’s proposed regulations and
Publication 590 currently permit one rollover per account, the IRS is extending
transitional relief and will not apply the Tax Court’s interpretation to the
rollover rule to any rollover that involves an IRA distribution occurring
before January 1, 2015.
These actions by the IRS will not affect the ability of
an IRA owner to transfer funds from one IRA trustee directly to another because
such a transfer is not a rollover and, therefore, is not subject to the one
rollover-per-year limitation.
Taxpayers considering utilizing the 60-day rollover rule
should be cautious about possibly violating the once-per-year rollover rule.
Please call this office if you have any concerns.
Joseph C Becker, CPB, MBA, CQP
Ten Forty plus Quality Tax Preparation & Financial Services
www.tenfortyplus.com
281-397-7777, Fax 281-397-7443
joeb@tenfortyplus.com
Ten Forty plus Quality Tax Preparation & Financial Services
www.tenfortyplus.com
281-397-7777, Fax 281-397-7443
joeb@tenfortyplus.com
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