Taxpayers who miss the 60-day window to roll over retirement plan and/or IRA distributions to another plan or IRA can now self-certify the reason to the plan administrator or IRA trustee without submitting a private letter ruling request to the IRS. 

The IRS released Aug. 24 Rev. Proc. 2016-47, which allows taxpayers who miss the 60-day rollover requirement to send a written certification to the plan administrator or IRA trustee, using a model letter also in the revenue procedure. (See related story, Retirement Plan Rollovers Just Got a Little Easier). 

The IRS must not have previously denied a waiver request for the missed deadline. In addition, the missed contribution has to be made “as soon as practicable,” which the revenue procedure says is within 30 days, after the reason for failing to roll the funds over ceases to be an impediment to rollover. 

However, a plan administrator or an IRA trustee may not rely on the self-certification for other purposes or if the plan administrator or IRA trustee has actual knowledge that is contrary to the self-certification. 

Previously, missing the deadline meant filing a request for a private letter ruling from the IRS. The price for this increased dramatically in 2016 to $10,000 per request, and often taxpayers also have to pay for the services of an attorney. The tax consequences of the missed deadline can be a surprise. For example, where the deadline was missed because of financial institution error, many taxpayers only learned about the problem after being informed they were subject to income tax on the full rollover amount. 

Allowing taxpayers to self-certify the reason for missing the rollover window will help reduce the volume of PLRs that the IRS has to deal with. The agency has fewer resources than in the past, and has been looking for ways to reduce its workload. For example, the determination letter process was recently streamlined to reduce the strain on the IRS’s staff. (See related story, IRS Guidance Solidifies Determination Letter Changes). 

To self-certify, taxpayers have to submit a written certification to the plan administrator or IRA trustee. IRS has provided a model letter in Rev. Proc. 2016-47 that can be used. There are 11 allowable reasons listed by the IRS:

  1. An error was committed by the financial institution making the distribution or receiving the contribution.
  2. The distribution was in the form of a check and the check was misplaced and never cashed.
  3. The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was a retirement plan or IRA.
  4. The taxpayer’s principal residence was severely damaged.
  5. A family member of the taxpayer died.
  6. The taxpayer or a family member was seriously ill.
  7. The taxpayer was incarcerated.
  8. Restrictions were imposed by a foreign country.
  9. A postal error occurred.
  10. The distribution was made on account of an IRS levy and the proceeds of the levy were returned to the taxpayer.
  11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.

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