The Internal Revenue Service issued Revenue Procedure 2016-47 on August 24, 2016. The Revenue Procedure provides guidance on a new self-certification procedure designed to help taxpayers who miss the 60-day limit for rolling over retirement plan distributions to another retirement plan, such as an IRA or other qualified account.

The best way for a taxpayer to rollover and IRA or other retirement plan into a rollover IRA account is through a “trustee to trustee” transfer.  This means the administrator of a retirement plan or IRA directly transfers the funds or investments in the IRA to another IRA administrator. Sometimes, an individual may first receive a distribution from their current retirement plan. An eligible distribution from an IRA or retirement plan, such as a 401K plan, can only qualify for tax-free rollover treatment if it is contributed to another IRA or retirement plan by the 60th day after it was received by the taxpayer. Prior to the new Revenue Procedure, taxpayers who failed to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS costing $10,000. The procedure authorized by the IRS yesterday provides a new taxpayer-friendly option.

Under Revenue Procedure 2016-47, a taxpayer who missed the 60-day time limit may now qualify for a waiver if they meet one or more of eleven specific circumstances including, for example, delays caused by a death or illness in the family, misplacing a distribution check or a return of IRS levied retirement funds. The new self-certification procedure will save eligible taxpayers significant taxes and penalties for missing the 60-day rollover period if they qualify for the waiver. It will also save taxpayers the significant cost of requesting a private ruling letter from the IRS.

A taxpayer may make a written certification to a plan administrator or an IRA trustee that a contribution satisfies the conditions in the revenue procedure for requesting a waiver of the 60-day rollover requirement. A copy of the certification should be kept in the taxpayer’s files and be available if requested on audit. The contribution must be made to the plan or IRA as soon as practicable after the reason or reasons certified to no longer prevent the taxpayer 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 the taxpayer from making the contribution.

Plan administrators will be reporting to you and the IRS IRA rollover contributions received after the 60-day deadline on Form 5498.

Click on the link below for a model self-certification letter.