IRS Offers Guidance on After-Tax Rollover Allocations

The IRS has released proposed regulations to address the tax treatment of distributions from designated Roth IRA accounts under tax-favored retirement plans.

The proposed regulations, released last month, would limit the applicability of the rule regarding the allocation of after-tax amounts when disbursements are made to multiple destinations so the allocation rule would apply only to distributions made before the earlier of Jan. 1, 2015 or a date chosen by the taxpayer on or after Sept. 19, 2014.

The IRS also released a related notice last month providing guidance on the allocation of after-tax amounts to rollovers. Notice 2014-54 provides the rules for allocating pretax and after-tax amounts among disbursements that are made to multiple destinations from a qualified plan described in Section 401(a) of the Tax Code. The rules also apply to disbursements from a 403(b) plan or a 457(b) plan maintained by a government employer.

Read more:

• What New IRS Rules Mean for IRAs: Tax Strategies Scan
• Naming an IRA Beneficiary: Spouse or Trust?
• After High Court Ruling, How to Protect Clients
• IRS Clarifies IRA Rollover Limitation