Topic 413   Rollovers from Retirement Plans (Roth IRA & Tradition IRA)

Updated : Sep 10, 2019 in Articles

Topic 413 Rollovers from Retirement Plans (Roth IRA & Tradition IRA)


A rollover occurs when you withdraw cash or
other assets from one eligible retirement plan and, contribute all or part of it, within
60 days, to another eligible retirement plan. This rollover transaction isn’t taxable, unless,
the rollover is to a Roth IRA, but, it is reportable on your federal tax return. You
must include the taxable amount of a distribution that you don’t roll over, in income in the
year of the distribution. Certain distributions from an eligible retirement
plan can’t be rolled over, which include. Generally, the nontaxable part of a distribution,
such as your after-tax contributions to a retirement plan, a distribution that’s one
of a series of payments made for your life or, life expectancy, or the joint lives or,
joint life expectancies of you and your beneficiary, or, made for a specified period of 10 years
or more, a required minimum distribution, a hardship distribution, dividends paid on
employer securities, or the cost of life insurance coverage.
Other exclusions exist for certain loans and corrective distributions.
If a plan pays you an eligible rollover distribution, you have 60 days from the date you receive
it to roll it over to, another eligible retirement plan.
If you’ve missed the 60-day deadline, you may still be able to complete a rollover by
self-certifying that, you qualify for a waiver of the 60-day requirement. For details, see
Revenue Procedure 2016-47. You can only make one rollover from an IRA
to another or, the same IRA in any one-year period, regardless of the number of IRAs you
own. A trustee-to-trustee transfer isn’t a rollover and, isn’t affected by this rule.
This rule also doesn’t apply to you if, you convert a traditional IRA to Roth IRA.
Any taxable eligible rollover distribution paid to you from an employer-sponsored retirement
plan is subject to a mandatory income tax withholding of 20%, even if you intend to
roll it over later. If you do roll it over, and want to defer tax on the entire taxable
portion, you’ll have to add funds from other sources equal to the amount withheld. You
can choose instead a direct rollover, in which, you have the payer transfer a distribution
directly to another eligible retirement plan including an, IRA. The 20% mandatory withholding
doesn’t apply in a direct rollover. If you’re under age 59½ at the time of the
distribution, any taxable portion not rolled over, may be subject to an additional 10%
tax on early distributions unless, an exception applies. For a list of exceptions, refer to
Topic 558. Certain distributions from a SIMPLE I R A will be subject to an additional 25%
tax instead of the additional 10% tax. For more information on SIMPLE IRAs, refer to
Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
on IRS website. For further information about rollovers and
transfers, refer to Publication 575, Pension and Annuity Income on IRS website.

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