The IRS has issued guidance clarifying the impact that a 2014 rollover of an individual retirement arrangement has on the one-per-year limit imposed by the Tax Code on tax-free rollovers between IRAs.
The clarification relates to a change,
Before 2015, the one-per-year limit applies only on an IRA-by-IRA basis (that is, only to rollovers involving the same IRAs). Beginning in 2015, the limit will apply by aggregating all an individuals IRAs, effectively treating them as if they were one IRA for purposes of applying the limit.
To help taxpayers by allowing time for transition to the new interpretation, the IRS announced shortly after the January 2014 Tax Court decision that the new interpretation would not apply before Jan. 1, 2015.
In
Although an eligible IRA distribution received on or after Jan. 1, 2015 and properly rolled over to another IRA will still get tax-free treatment, subsequent distributions from any of the individuals IRAs (including traditional and Roth IRAs) received within one year after that distribution will not get tax-free rollover treatment. The guidance makes clear that a rollover between an individuals Roth IRAs will preclude a separate tax-free rollover within the one-year period between the individuals traditional IRAs, and vice versa.
As before, Roth conversions (rollovers from traditional IRAs to Roth IRAs), rollovers between qualified plans and IRAs, and trustee-to-trustee transfersdirect transfers of assets from one IRA trustee to anotherare not subject to the one-per-year limit and are disregarded in applying the limit to other rollovers.
IRA trustees are encouraged to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA. IRA trustees can accomplish a trustee-to-trustee transfer by transferring amounts directly from one IRA to another or by providing the IRA owner with a check made payable to the receiving IRA trustee.
More information on the rule change can be
Michael Cohn, editor-in-chief of AccountingToday.com.
Read more: