Most pre-retirement payments you receive from a retirement plan or IRA can be “rolled over” by depositing the payment in another retirement plan or IRA within 60 days. You can also have your financial institution or plan directly transfer the payment to another plan or IRA. Show
The Rollover ChartPDF summarizes allowable rollover transactions. Why roll over?When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred. If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions. How do I complete a rollover?
When should I roll over?You have 60 days from the date you receive an IRA or retirement plan distribution to roll it over to another plan or IRA. The IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of circumstances beyond your control. IRA one-rollover-per-year ruleYou generally cannot make more than one rollover from the same IRA within a 1-year period. You also cannot make a rollover during this 1-year period from the IRA to which the distribution was rolled over. Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. The one-per year limit does not apply to:
Background of the one-per-year ruleUnder the basic rollover rule, you don't have to include in your gross income any amount distributed to you from an IRA if you deposit the amount into another eligible plan (including an IRA) within 60 days (Internal Revenue Code Section 408(d)(3)); also see FAQs: Waivers of the 60-Day Rollover Requirement). Internal Revenue Code Section 408(d)(3)(B) limits taxpayers to one IRA-to-IRA rollover in any 12-month period. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), published in 1981, and IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) interpreted this limitation as applying on an IRA-by-IRA basis, meaning a rollover from one IRA to another would not affect a rollover involving other IRAs of the same individual. However, the Tax Court held in 2014 that you can't make a non-taxable rollover from one IRA to another if you have already made a rollover from any of your IRAs in the preceding 1-year period (Bobrow v. Commissioner, T.C. Memo. 2014-21). Tax consequences of the one-rollover-per-year limitBeginning in 2015, if you receive a distribution from an IRA of previously untaxed amounts:
Additionally, if you pay the distributed amounts into another (or the same) IRA, the amounts may be:
Direct transfers of IRA money are not limitedThis change won't affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn't a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers. Which types of distributions can I roll over?IRAs: You can roll over all or part of any distribution from your IRA except:
Retirement plans: You can roll over all or part of any distribution of your retirement plan account except:
Distributions that can be rolled over are called "eligible rollover distributions." Of course, to get a distribution from a retirement plan, you have to meet the plan’s conditions for a distribution, such as termination of employment. Will taxes be withheld from my distribution?
How much can I roll over if taxes were withheld from my distribution?If you have not elected a direct rollover, in the case of a distribution from a retirement plan, or you have not elected out of withholding in the case of a distribution from an IRA, your plan administrator or IRA trustee will withhold taxes from your distribution. If you later roll the distribution over within 60 days, you must use other funds to make up for the amount withheld. Example: Jordan, age 42, received a $10,000 eligible rollover distribution from her 401(k) plan. Her employer withheld $2,000 from her distribution.
If you roll over the full amount of any eligible rollover distribution you receive (the actual amount received plus the 20% that was withheld - $10,000 in the example above):
What happens if I don’t make any election regarding my retirement plan distribution?The plan administrator must give you a written explanation of your rollover options for the distribution, including your right to have the distribution transferred directly to another retirement plan or to an IRA. If you’re no longer employed by the employer maintaining your retirement plan and your plan account is between $1,000 and $5,000, the plan administrator may deposit the money into an IRA in your name if you don’t elect to receive the money or roll it over. If your plan account is $1,000 or less, the plan administrator may pay it to you, less, in most cases, 20% income tax withholding, without your consent. You can still roll over the distribution within 60 days. Which retirement accounts can accept rollovers?You can roll your money into almost any type of retirement plan or IRA. See the Rollover ChartPDF for options. Is my retirement plan required to allow transfer of any amounts eligible for a distribution?If you receive an eligible rollover distribution from your plan of $200 or more, your plan administrator must provide you with a notice informing you of your rights to roll over or transfer the distribution and must facilitate a direct transfer to another plan or IRA. Is my retirement plan required to accept rollover contributions?Your retirement plan is not required to accept rollover contributions. Check with your new plan administrator to find out if they are allowed and, if so, what type of contributions are accepted. Additional resources
How are IRA distributions taxed?Regardless of your age, you will need to file a Form 1040 and show the amount of the IRA withdrawal. Since you took the withdrawal before you reached age 59 1/2, unless you met one of the exceptions, you will need to pay an additional 10% tax on early distributions on your Form 1040.
How is early distribution from Roth IRA taxed?More In Help. To discourage the use of IRA distributions for purposes other than retirement, you'll be assessed a 10% additional tax on early distributions from traditional and Roth IRAs, unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½.
Is an IRA distribution considered earned income?A distribution from a traditional IRA will be included in the owner's income as ordinary income and, depending on the owner's age, may also be subject to a 10% early distribution penalty. Qualified distributions from Roth IRAs are not subject to income tax.
Under which type of IRA can investors contribute with after tax assets and withdrawals are usually untaxed?With a Roth IRA, you contribute after-tax dollars, your money grows tax-free, and you can generally make tax- and penalty-free withdrawals after age 59½. With a Traditional IRA, you contribute pre- or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.
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