Self-Certification After 60 Days: 12 Reasons
There are two ways to move money from one IRA to another: a direct transfer or a 60-day rollover. With direct transfers, the funds are sent directly from one custodian to another. The IRA owner has no ability to use the dollars while they are in transit, and the transaction does not create any tax reporting. A direct transfer can be processed electronically, or a check can be sent. A check made payable to the receiving custodian “for the benefit of” (FBO) the IRA owner qualifies as a direct transfer. A direct transfer is the recommended way to move IRA dollars.
A 60-day rollover is a far riskier way to move IRA funds from one institution to another. The 60 days begin on the day the funds are received by the IRA owner. If they are not rolled over by the end of this 60-day window, it will be a taxable distribution. If the IRA owner is under age 59½, a 10% early withdrawal penalty will also apply (unless an exception exists). Additionally, even if the rollover is completed within 60 days, the transaction will generate tax forms that must be accounted for when the IRA owner files his tax return. A Form 1099-R will show the distribution, and a Form 5498 will show the corresponding rollover deposit.
The IRS has been agreeable to extend the deadline in certain situations. In fact, so many private letter ruling (PLR) requests were submitted over the years (pleading for an extension) that the IRS created a list of 12 items they will typically accept as reasons for missing the rollover deadline. The IRS went a step further and provided a means for IRA owners to self-certify that the reason they missed the deadline was due to one of these 12 reasons. With self-certification, an expensive PLR is not required. (Note that this self-certification process is not a get-out-of-jail free card. The IRS could still refuse the late rollover if it determines there was a larger violation of the rules.)
The 12 acceptable reasons for self-certification are:
- An error was committed by the financial institution making the distribution or receiving the contribution.
- The distribution was in the form of a check and the check was misplaced and never cashed.
- The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA.
- My principal residence was severely damaged.
- One of my family members died.
- I or one of my family members was seriously ill.
- I was incarcerated.
- Restrictions were imposed by a foreign country.
- A postal error occurred.
- The distribution was made on account of an IRS levy, and the proceeds of the levy have been returned to me.
- The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover, despite my reasonable efforts to obtain the information.
- The distribution was made to a state unclaimed property fund.
By Andy Ives, CFP®, AIF®
IRA Analyst
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.