Rev. Proc. 2020-46 provides a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or IRA.
Eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. The revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that he or she qualifies for the waiver.
Normally, an eligible distribution from an IRA or conventional retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.
A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer’s home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated, restrictions were imposed by a foreign country or distribution was made to a state unclaimed property fund.
Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that he or she qualifies for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements can be found in the revenue procedure. The self-certification is filed with the IRA custodian or plan administrator, not the IRS. The custodian uses Box 13c of Form 5498, IRA Contribution Information, to illustrate reporting of certified late rollovers.
No special reporting is necessary on the federal tax return. However, the IRS modified the instructions to Form 5498 to require that an IRA trustee or custodian, who accepts a late rollover with a self-certification, report that it was accepted after the deadline. Your client should be aware that with this new reporting requirement, the IRS will know which rollovers were late and, therefore, can apply a higher level of scrutiny.
|
