One Rollover Per Year Rule Clarified

Post Date: 11/14/14
Last Updated: 11/14/14


Cross References
- Announcement 2014-32

A rollover is a tax-free distribution from one retirement plan that is then contributed to another retirement plan. The contribution to the second retirement plan is called a rollover contribution. A taxpayer has until the 60th day following a distribution to make a rollover contribution. Distributions that are not rolled over in 60 days are taxable in the year distributed.

Under IRC section 408(d)(3)(B), if any part of a distribution from an IRA is rolled over tax free, no other IRA rollover is allowed within a 1-year period. The 1-year period begins on the date the IRA distribution is first received, not the date it was rolled over into the second IRA.

Announcement 2014-15. Earlier in the year, the IRS announced that effective January 1, 2015, the 1-year rollover rule applies to all of the taxpayer's IRAs in the aggregate. Previous instructions stated that the 1-year rule applied to a distribution from the same IRA. Under the new guidance, a taxpayer must wait one year before making another tax-free IRA rollover from any of the taxpayer's IRAs.

Announcement 2014-32. New guidance clarifies that this one rollover per year rule for all of the taxpayer's IRAs applies to IRA distributions on or after January 1, 2015. As a transition rule, a distribution occurring in 2014 that was rolled over is disregarded for purposes of determining whether a 2015 distribution can be rolled over, provided that the 2015 distribution is from a different IRA that neither made nor received the 2014 distribution.

As a reminder, the announcement said a rollover from a traditional IRA to a Roth IRA (a conversion) is not subject to the one-rollover-per-year limitation, and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers. The one-rollover-per-year limitation also does not apply to a rollover to or from a qualified plan, nor does it apply to trustee-to-trustee transfers. Thus, if a taxpayer wishes to transfer funds in one IRA to another before the one-year time limit has expired since his or her previous rollover, the taxpayer should transfer the funds using a trustee-to-trustee transfer.
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