Simple, Honest IRA Rollover Guidance for Beginners

An IRA rollover moves all or part of a distribution from one retirement account to another eligible retirement plan or IRA. A rollover is generally not taxable when pre-tax money moves to another pre-tax account, but moving pre-tax money to a Roth account is generally taxable. The transaction is reportable on your federal tax return.

If a retirement plan or IRA distribution is paid to you, you generally have 60 days from the date you receive it to complete an eligible rollover. You may qualify for late-rollover relief through an automatic waiver, self-certification, or an IRS private letter ruling. Any taxable amount not rolled over must be included in income and may also face the 10% additional tax if no exception applies.

With a direct rollover from an employer plan, the plan sends the eligible distribution to the receiving plan or IRA instead of paying it to you. This generally avoids mandatory 20% withholding and removes the need to redeposit the funds within 60 days. Tax may still apply when pre-tax money is rolled to a Roth account.

If an employer plan pays an eligible rollover distribution that includes taxable amounts to you, the plan generally must withhold 20% for federal income tax. To roll over the full amount, you must replace the withheld amount from other funds within 60 days. Any portion not rolled over is generally taxable and may also face the 10% additional tax if no exception applies.