Normally you have 60 days to rollover retirement plan distributions in order to avoid current taxation and possible penalty. If you have special circumstances challenging your ability to complete the rollover within this 60-day time frame, please be advised that there are several circumstances in which the IRS has repeatedly given taxpayers additional time to complete the rollovers.
In an attempt to help taxpayers avoid costs and time, the IRS released Revenue Procedure 2016-47. This 'Rev Proc' in tax geek speak has a self-certification statement which should be completed and given to the financial institution receiving the rollover. Be sure to keep a copy of the statement in question along with the Rev Proc in case audited.
Here's the catch...
The contribution must be made to the plan or IRA as soon as practicable after the reason(s) listed no longer prevent you from making the contribution. This requirement is deemed to be satisfied if the contribution is made within 30 days after the reason or reasons no longer prevent you from making the contribution. Make sure your reasoning is substantiated with documentation, ideally from 3rd party sources.
Sample text of the letter in question to submit to the new custodian taken directly from IRS Rev Proc 2016-47 reads as follows:
Certification for Late Rollover Contribution Letter
City, State, ZIP Code
Plan Administrator/Financial Institution
City, State, ZIP Code
Dear Sir or Madam:
Pursuant to Internal Revenue Service Revenue Procedure 2016-47, I certify that my contribution of $ [ENTER AMOUNT] missed the 60-day rollover deadline for the reason(s) listed below under Reasons for Late Contribution. I am making this contribution as soon as practicable after the reason or reasons listed below no longer prevent me from making the contribution.
I understand that this certification concerns only the 60-day requirement for a rollover and that, to complete the rollover, I must comply with all other tax law requirements for a valid rollover and with your rollover procedures.
Pursuant to Revenue Procedure 2016-47, unless you have actual knowledge to the contrary, you may rely on this certification to show that I have satisfied the conditions for a waiver of the 60-day rollover requirement for the amount identified above.
You may not rely on this certification in determining whether the contribution satisfies other requirements for a valid rollover.
Reasons for Late Contribution
I intended to make the rollover within 60 days after receiving the distribution but was unable to do so for the following reason(s) (check all that apply):
- An error was committed by the financial institution making the distribution or receiving the contribution.
- The distribution was in the form of a check and the check was misplaced and never cashed.
- The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA.
- My principal residence was severely damaged.
- One of my family members died.
- I or one of my family members was seriously ill.
- I was incarcerated.
- Restrictions were imposed by a foreign country.
- A postal error occurred.
- The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to me.
- The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite my reasonable efforts to obtain the information.
I declare that the representations made in this document are true and that the IRS has not previously denied a request for a waiver of the 60-day rollover requirement with respect to a rollover of all or part of the distribution to which this contribution relates.
I understand that in the event I am audited and the IRS does not grant a waiver for this contribution, I may be subject to income and excise taxes, interest, and penalties. If the contribution is made to an IRA, I understand you will be required to report the contribution to the IRS.
I also understand that I should retain a copy of this signed certification with my tax records.