There are a number of reasons why you might want to roll money from a retirement account, such as a 401K or IRA, into other accounts. If you change jobs, you’ll probably roll your old 401K to your new company’s account. Conversion to new accounts, or account types, may occur in the event of job loss, retirement, or death. You may have to deal with the accounts of loved ones for which you are the beneficiary.
In any case, you will find yourself subject to certain requirements regarding the rollover of retirement funds to prevent having the money taxed as personal income. Currently, there is a 60-day limitation on such rollovers.
In cases beyond an individual’s reasonable control, however, the IRS does not want to cause undue hardship. There are ways to extend or waive this limitation. The IRS recently simplified the process to provide additional avenues for qualified individuals to obtain the waiver.
Previously, there were two ways in which individuals could obtain a waiver of the 60-day limitation. If a financial organizational error occurred, a waiver could be gained automatically from the IRS to stave off unfair taxation. The other option was to request a private letter ruling (PLR), which currently costs $10,000. The potential taxation would have to exceed this amount to make it worthwhile.
Revenue Procedure 2016-47
This change to revenue procedure is designed to provide a third option in cases of waiving the 60-day rollover requirement. This option is for those who have received distributions from retirement accounts, and failed to meet the 60-day deadline. Under Revenue Procedure 2016-47, qualifying individuals are now allowed to self-certify that they have satisfied the requirements for accepting and reporting rollovers.
Self-certification is accomplished by filling out and signing a model letter, or a form provided in the appendix of Revenue Procedure 2016-47, or a similar form. This letter is given to the financial company. It can also be given to the plan administrator receiving the rollover. Then they can file it with the IRS, along with other applicable paperwork. Additionally, the IRS has new latitude to waive the 60-day limitation during the course of an audit, even if the individual failed to self-certify at the time of the rollover.
This is not to say that everyone who receives a distribution from a retirement account will qualify for this self-certification waiver. It’s always best to try completing a rollover and filing the appropriate paperwork within 60 days. However, Revenue Procedure 2016-47 provides new ways for people dealing with circumstances beyond their control, to extend deadlines and avoid paying unjust taxes or fees.