MYMM 509: New IRS Ruling That Could Save You Big

The Minding Your Money Minute | Business and Personal Finance Tips to Manage Your Money Better

Today on the Minute – I want to report on a new IRS ruling that could say you big time. The IRS has a ruling regarding IRAs that allows for a 60-day rollover to move money indirectly from one retirement account to another... Today on the Minute – I want to report on a new IRS ruling that could say you big time. The IRS has a ruling regarding IRAs that allows for a 60-day rollover to move money indirectly from one retirement account to another, something you might do when switching jobs, retiring or you need some temporary funds (which I discourage this last one), for example. In a typical 60-day rollover, a person will take a distribution from one of their retirement accounts via a check made payable to them personally. Then, within 60 days, they deposit it into another retirement account. There are a couple of things to note here. First, if it’s not completed within 60 days it will be deemed to be a distribution subject to taxes and penalties if you are under 59 1/2. Second, if taxes are taken out, you will need to replace the entire amount to avoid taxes and penalties. Now it used to be that if you missed that 60-day window – the only way to get out of paying the taxes and penalties was to go through an appeal process that could cost thousands of dollars and take months to get an answer regarding your appeal. Now the friendlier, kinder IRS has made the process smoother by accepting 11 approved excuses why you couldn’t get the money transferred in time. These 11 excuses range from my dog ate the check – just kidding – they range from a death or an illness in the family to incarceration … at which point you probably have bigger problems on your hands. Other popular excuses include financial institution error, a distribution check was misplaced and never cashed, the rollover was accidentally deposited into the wrong account, postal errors and the severe damage to a principal residence. The takeaway here is to avoid this in the first place by having one institution directly transfer the funds to the other without putting you in the middle. And, that’s the minute for today. I have included all 11 in today’s post so you can visit the minding your money minute website to view them all. Have you signed up for the minding your money movement yet? If not, make you way to my website – psworth.com and sign up. It’s easy an easy way to show your support for the cause and build your financial skills at the same time. Thanks for listening and as always remember that minding your money really is the path to a richer life! RESOURCE: 11 'excuses' the IRS will takeTo self-certify a late 60-day rollover, your delay must be attributable to one of the following: - Financial institution error - You misplaced your rollover check and it was never cashed - You deposited your distribution into an account you thought was a retirement account and it remained there until you completed your rollover - Your principal residence was severely damaged - There was a death in your family - You or one of your family members was seriously ill - You were incarcerated - Restrictions were imposed upon you by a foreign country - A postal error occurred - Your distribution was made on account of an IRS levy and the proceeds of the levy have been returned - Despite reasonable efforts to obtain information, the distributing company did not provide information required by the receiving company Source: IRAhelp.com