Application of One-Per-Year Limit on IRA Rollovers

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L1: Application of One-Per-Year Limit on IRA RolloversMany thanks to David L. Zalles, also known on the forum as dlzallestaxes for sending me the information on the recent court decision that imposes a once per year limit on IRA account rollovers – once per year for all accounts, not once per year for each account.
Note… David also suggested adding a clarification that this NOT CALENDAR YEAR, but rather 12 CONSECUTIVE MONTHS, which could transcend into 2 different calendar years.
Check out the fulll articleHERE2014-03-21 16:14, By: Gfw, IP: []

L2: Application of One-Per-Year Limit on IRA RolloversIt will be interesting to determine how much cooperation the IRS will get from IRA custodianswith respect to enforcement of the new rollover limitation. Many taxpayers have IRAs with several different custodians who have no way of knowing how many otherIRAaccounts are owned by the taxpayer. While some taxpayers including Bobrow have established multiple IRA accounts for the sole purpose oftaking loans from their IRA, there will be other innocentparties who may end up having theirentire IRA value distributed and taxable under the new rules. Picture elderly IRAowner who hashis entireIRA in a bank CD with a 9 month maturity and has been moving this CD from bank to bank for decades now. Upon the second movement of funds after 1/1/2015 in this manner, his IRA would be fully distributed, fully taxed, and he would have an excess contribution to the current CD that needs to be corrected to avoid a 6% excise tax. Add on the bank early withdrawal penalty if the correction is done before the CD matures.
Expect to see more Roth conversions as an escape hatch, if the rollover limit is detected within 60 days. Conversions are not subject to the rollover limits, and therefore the taxpayer could convert and then recharacterize the conversion back to the TIRA account in order to complete the second rollover.
With respect to 72t plans, in the past any change of custodian was recommended by using the direct trustee transfer method in order to preserve the one rollover allowed for the 72t IRA in which the taxpayer could return a distribution that exceeded the calculated amount for the year and thereby preserve the 72t plan. While this safety valve still applies, the taxpayer now must avoid using up the one rolloverper 12 months with any additional IRA accounts owned outside the plan. So indirectly, the new rules will marginallyincrease the risk of busting the plan.
I doubt that Announcement 2014-15 will be implemented without alterations when all is said and done, but we have to assume that it will be.
2014-03-21 16:50, By: Alan S, IP: []