CWF's Primer on IRA Rollover Rules

There are seven (7) IRA rollover rules:

  1. An RMD is never eligible to be rolled over
  2. A person is authorized to rollover only one distribution within a 12 month period,
  3. The rollover must be completed within 60 days.
  4. An inherited IRA (non-spouse beneficiary) is never eligible to roll over a distribution from an inherited IRA:
  5. If property is distributed (and not cash), such property must be a rollover. The property cannot be sold and the proceeds rollover over as is the case when property is distributed from a qualified plan.
  6. SIMPLE IRA funds may be rolled over into a traditional IRA, SEP-IRA or a 401(k) or vice versa only if the individual has met the 2 year requirement.
  7. Roth IRA funds can only be rolled over into the same or a different Roth IRA.

A person who fails to comply with all of the above 7 rules is ineligible to make a rollover contribution.

The IRS has been granted the authority by a 2001 tax law to grant relief to someone who has missed the 60 day rule because he or she incurred some difficulty or hardship and it would be unjust, or inequitable for the IRS to not waive the 60 day rule. Waive means the IRS creates a new 60 day period for the individual to complete the rollover.

The IRS' position is - it does not have the statutory authority to grant rollover relief to a person who fails to comply with any of the other rollover rules.

The IRS can't grant relief to any person who has taken multiple IRA distributions during a twelve month and makes an ineligible rollover contribution.

The IRS can't grant relief to a nonspouse beneficiary who was paid a distribution by an IRA trustee.

The IRS can't grant relief and allow someone to roll over a required distribution.

The IRS can't grant relief if a person receives an in-kind distribution from his or her IRA, sells the asset, and then impermissibly rolls over the sales proceeds. If a distribution is ineligible to be rolled over but it is contributed as a rollover, such distribution will need to be included in the individual's taxable income and it will be an excess contribution subject to the excess contribution rules until corrected by withdrawal.