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How does the IRS' rule change regarding IRA rollovers impact you?
by Kathleen Kaminski, CPA
July 2015

The Internal Revenue Service (IRS) has held a decades old stance that only one Individual Retirement Account (IRA) distribution may be rolled over during a 12 month period for each IRA that you maintain. Therefore, multiple IRAs may be rolled over in a given year so long as the same IRA is not being distributed and rolled over more than one time.

Furthermore, the IRS issues guidance stating that the funds distributed from your IRA will not be taxed as income as long as they are rolled into an IRA that you own within a 60 day window. If this deadline closes and the funds remain in your bank account, your money may be subject to income tax and penalties on the distribution. The additional income and penalties can amount to a substantial increase in your tax liability come April 15th. As a taxpayer, your top priority when initiating an IRA rollover is to ensure that the funds are transferred to another IRA account within the 60 day compliance window and do not remain in your bank account!

New Rule

Effective January 1, 2015, the IRS applied a new interpretation to this rule. The newly amended rule limits an individual to one nontaxable 60 day rollover between IRAs in any given 12 month period. A taxpayer who owns 5 IRAs may now only make one distribution that may be treated as a rollover, as opposed to up to 5 rollovers in the past.

If you own/manage multiple IRAs and are interested in taking advantage of a rollover, it may be beneficial to consult an investment advisor and your certified public accountant. The IRS has placed a restriction on the number of rollovers allowable in a tax year, therefore a more comprehensive plan should be discussed to provide for a temporary loan from your IRA.

For more information about IRAs contact Kathleen Kaminski, CPA at Grossman St. Amour CPAs at 315.701.6322, or kkaminski@gsacpas.com.

 




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