60-Day IRA Rollover Deadline Waived
An IRA rollover must typically be done within 60 days. In other words, you have 60 days from the receipt of a distribution to put it into another retirement account, without being taxed.
But there are instances where the 60-day deadline may be waived.
In one instance, the IRS waived the 60-day deadline because the individual did not receive a 402(f) rollover notice. The 402(f) rollover notice notifies the taxpayer of the options and benefits of rolling the account over. The rollover notice helps the taxpayer avoid penalty and immediate tax.
Other events that could waive the 60-day deadline include: disaster, casualty or other similar events which are beyond the control of the recipient.
Receiving a distribution
A retirement plan is meant to benefit the individual. If the individual receives some of the funds from the retirement plan, he/she has several options. He can utilize the funds toward living expenses. He could deposit the funds into a money market account.
The options are endless, but the important thing to remember is that those funds are subject to federal income taxation.
The accountant who helps in filing the income tax returns must inform the taxpayer that the full benefit amount is subject to federal income taxation. This must be done within 60-days after the taxpayer receives the distribution. The accountant must also inform the taxpayer regarding the early withdrawal penalty according to IRC Sec. 72(t).
The accountant is also tasked to advise the taxpayer regarding the 402(f) notice. Since the taxpayer did not receive one in the above case, the accountant advised him to request a waiver of the 60-day rollover deadline from the IRS. In this case, the IRS waived the 60-day deadline due to the failure to deliver the 402(f) notice.
IRA rollovers to another retirement account
If the amount is rolled over to another eligible retirement plan, particularly into an IRA, within 60 days, the amount is not taxable. This action is called an indirect rollover.
