Failed IRA rollover

A bunch of us know that we are allowed to take our IRA money out, and as long as we put it back in within 60 days there is no taxable event.

Unfortunately a lot of us and our advisors don’t know the specifics and each year a lot of people end up having to pay taxes on the failed IRA rollover.

A few years back Congress passed a law saying that if it wasn’t the IRA owner’s fault, and the IRA owner could prove it wasn’t their fault, the IRS could grant clemency to the IRA owner and not treat the IRA as distributed. This law has been utilized quite a bit since it was passed and my guess is that hundreds of IRAs have been saved.

Today the IRS issued LTR 201034025. Unfortunately the IRA owner didn’t provide any proof that the error wasn’t the IRA owners, thus the IRS said the IRA was fully distributed.

If for some reason you didn’t complete your rollover within 60 days, all hope isn’t lost. So long as you can provide proof it wasn’t your fault, and go to the IRS before the IRS goes to you, you have a good chance of not having a taxable event.