As last year, the President signed legislation Friday afternoon before
travelling to Hawaii for a two week family vacation. This year he signed
the “Military Construction and Veterans Affairs and Related Agencies
Appropriations Act of 2016 (Consolidated Appropriations and Tax
Measures).” Included in this law is the Protecting Americans From Tax
Hikes Act of 2015.
There are 4 provisions impacting IRAs.
First, the qualified charitable contribution/ distribution (QCD) rules
were adopted on a permanent basis. A distribution made during 2015
qualifies as a QCD if the following three rules were satisfied - the
distribution occurs during 2015, it is for an amount up to $100,000 and
the check is made payable to a qualifying charity.
It will be interesting to see if the IRS will change its current
administrative practice for QCDs. That is, the IRA custodian prepares
the Form 1099-R showing the distribution as being fully taxable and then
the individual must explain on his or her tax return that the
distribution is not taxable as he or she made a QCD. Because the QCD
rules are no long temporary, one would think the IRS would now give
serious consideration to assigning a special Form 1099-R code for the
non-taxable QCD to expressly indicate the QCD is tax-fee.
Secondly, modified the Internal Revenue Code rules for making a roll
over contribution into a SIMPLE-IRA. Under existing law, the only
distribution which was eligible to be rolled over into a SIMPLE-IRA was
if the distribution had come from another SIMPLE-IRA or the same
SIMPLE-IRA. That is, it was impermissible for a person to rollover a
distribution from a traditional IRA into a SIMPLE-IRA or from a 401(k)
plan into a SIMPLE IRA, from a 403(b) plan into a SIMPLE-IRA or from
certain other employer sponsored plans. The new rules are effective for
distributions occurring on or after December 19, 2015.
Such distributions are now eligible to be rolled over into a SIMPLE-IRA
as long as the individual has met the 2-year rule as set forth in Code
section 72(t).
Presumably and hopefully, the IRS will be revising its two Model
SIMPLE-IRA Forms (Form 5305-S and Form 5305-SA) because Article I of
such forms provide, “In addition the trustee will accept transfers or
rollovers from other SIMPLE-IRAs of the participant. No other
contributions will be accepted by the trustee.” These forms were last
revised in March of 2002 and as written do not allow for rollovers for
distributions from any IRAs and plans other than another SIMPLE-IRA. CWF
is revising its SIMPLE-IRA forms by adding this new rollover rule.
Rollover certification forms will also need to be revised.
The IRS should also be issuing a revised Rollover Chart as set forth in
Publication 590A.
Thirdly, a “technical” amendment was adopted extending the deadline for
rolling over certain airline payment amounts. In the FAA Modernization
and Reform Act, a person had been authorized to rollover certain airline
payments received with respect to certain bankruptcies. The rollover had
to be accomplished by August 4, 2012. Such rollover contribution was
authorized and it was not subject to the annual contribution limit. The
new tax law extends the deadline to be 180 days after December 18, 2015
or June 15, 2016.
The fourth IRA provision is discussed in the adjacent article discussing
a new de minimis rule which creates a major exception so that an IRA
custodian will be not be assessed the $250 penalty for an incorrect Form
1099-R.
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