IRA Rollover Guidance

In the past rollovers were allowed on a IRA-to-IRA basis, but the IRS has announced that it will now follow the Tax Court’s decision to limit a taxpayers rollovers to one a year no matter how many IRA the taxpayers has. The rollover will now be ruled on an aggregate basis.

By applying the rule on an aggregate basis, the IRS also announced that the proposed regulations will be withdrawn and a new set of regulations will be issued concerning the change by the tax court. The IRS position will now reflect the changes made by the Tax Court in the Bobrow decision, limiting rollovers.

In Sec. 408(d)(3)(A)(i), the taxpayer is permitted to rollover funds in the taxpayer’s IRA tax-free as long as the amount distributed is paid into an IRA for the taxpayers benefit within 60 days. Sec. 408(d)(3)(B) limits the subject to one-rollover-per-year. In the Bobrow case, the Tax Court held the taxpayer responsible when they made more than one rollover from more than one account in a year. The first was tax deductible and the full amount of the second rollover was taxable.

With the new stance, the IRS has received comments about the rule. IRA trustees now required to change their procedures for making IRA rollovers. Because of these changes, the IRS will not apply the changes to rollovers made before January 1, 2015.

The last thing the IRS specified was that this does not affect the IRA owner’s ability to transfer funds from one IRA trustee to another because this is not considered a rollover. The transfers are not related to a one-a-year limit.