IRS allows self-certification for late rollovers of retirement plan funds

The IRS issued a procedure for taxpayers to make a limited claim of eligibility for a waiver from the 60-day deadline for rolling over distributions from a retirement account into another qualified account (Rev. Proc. 2016-47).

An IRA trustee, custodian, or issuer or a plan administrator may rely on the taxpayer’s self-certification under the revenue procedure to accept and report receipt of a rollover contribution, unless that person is aware of facts contrary to the certification. The taxpayer may report a contribution made under a self-certification as a valid rollover unless and until the IRS determines otherwise. The self-certification must conform “in all material respects” to the sample in the appendix of the revenue procedure.

For taxpayers to qualify for self-certification, the IRS cannot have previously denied relief for the rollover, and the taxpayer may have missed the 60-day deadline only for one or more of the following 11 reasons:

• The financial institution receiving the contribution or making the distribution to which the contribution relates made an error;
• The distribution check was misplaced and never cashed;
• The distribution was deposited into an account that the taxpayer mistakenly thought was an eligible retirement plan;
• The taxpayer’s principal residence was severely damaged;
• A member of the taxpayer’s family died;
• The taxpayer or a member of the taxpayer’s family was seriously ill;
• The taxpayer was incarcerated;
• Restrictions were imposed by a foreign country;
• The post office made an error;
• The distribution was made on account of a levy under Sec. 6331, the proceeds of which were returned to the taxpayer; or
• 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.

The reasons include the “hardship exceptions” provided in Rev. Proc. 2003-16, which provides guidance on what remains the primary method of obtaining a waiver: an IRS private letter ruling. According to the IRS, the taxpayer’s self-certification is not a waiver of the 60-day requirement because the Service can still deny the waiver on audit if it determines the taxpayer did not meet the requirements. The new revenue procedure, however, modifies the earlier one to also allow the IRS to grant a waiver during an examination.

In addition, the rollover contribution must be made to the plan or IRA as soon as practicable after the reason or reasons for missing the 60-day deadline no longer prevent the taxpayer from doing so. This requirement is deemed to be satisfied if the contribution is made within 30 days after the reason or reasons no longer prevent the taxpayer from making the contribution. Form 5498, IRA Contribution Information, will be amended to permit plan trustees or administrators to report these rollovers.

• Rev. Proc. 2016-47

—By Sally P. Schreiber, J.D., a JofA senior editor.