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Do-It-Yourself Waiver of Rollover Deadline

New self-certification procedure will enable some investors to issue their own hardship waivers of the 60-day rollover deadline.

Natalie Choate, 09/09/2016

If you missed the 60-day deadline for completing the rollover of your retirement plan distribution, the IRS may have just made things a lot easier for you: They have created a new "self-certification" procedure that will enable some people to issue their own hardship waivers of the 60-day rollover deadline.

If your facts fit into one of the categories in the Revenue Procedure, then all you have to do is fill out the self-certification letter and give it to the administrator of the plan or IRA you're trying to put the money into. The plan administrator can rely on that to accept your money.

Of course if the IRS audits you and finds you lied on the certificate, you are going to owe all kinds of taxes and penalties. But for honest people who happen to fit the categories in the Rev. Proc., this is a wonderful development. Previously the only way to get that deadline waived was to apply to the IRS for your own Private Letter Ruling (PLR), which involves a $10,000 filing fee and a one-year (or more) wait!

The IRS lists 11 "hardships" that permit use of the self-certification procedure. The most popular one will be financial institution error. That is the basis for most of the waivers the IRS has issued over the 15 years since hardship waivers were born in 2001. Here are three examples out of the hundreds of financial institution blunders that have justified IRS waivers:

Financial institution informed taxpayer and her advisor (twice) that her account was not an IRA. The account statement did not reveal it was an IRA. So when taxpayer withdrew the money and transferred it to another institution, she did not put it into an IRA. Two years later the first institution informed her that, actually, it was an IRA! Late rollover allowed: PLR 201416013.

With the assistance of a representative of the bank, in 2008, taxpayer completed the form for creating a rollover traditional IRA and deposited her rollover check. The form "clearly indicated" the intent to roll into a traditional IRA. Instead, the bank put the money into a Roth IRA, a mistake that was not discovered until 2013, when the certificate of deposit matured. Late rollover allowed (for the original rollover amount, not the five years' worth of earnings): PLR 201524027.

Financial institution was supposed to transfer taxpayer's required minimum distribution from her IRA to her taxable account. Which it did. In fact, they did it twice, due to a coding mistake. Taxpayer didn't notice the mistaken double distribution until the following year. Late rollover of second distribution allowed: PLR 201429032.

If your facts sound like these facts, then you qualify for the self-certification procedure.

Natalie Choate practices law in Boston with Nutter McClennen & Fish LLP, specializing in estate planning for retirement benefits. Her book, Life and Death Planning for Retirement Benefits, is a leading resource for professionals in this field.

The author is not an employee of Morningstar, Inc. The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar. The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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