IRA 60-Day Rollover Rule

What the 60-Day Rollover Rule Means

A rollover generally happens when you take a distribution from one eligible retirement plan and contribute it to another eligible retirement plan or IRA. If the money is paid to you personally, you generally have 60 days from the date you receive the distribution to complete the rollover.

Count calendar days. The statutory period runs no later than the 60th day following the day you receive the distribution, so weekends and holidays are included in the count rather than automatically extending the deadline.

If you do not complete the rollover on time, the taxable amount may be included in your income for the year. If you are under age 59½, an additional 10% tax may also apply unless an exception fits your situation.

Direct Rollover vs Indirect Rollover

The rule mainly becomes dangerous when money is paid to you. A direct rollover or trustee-to-trustee transfer keeps the money moving between retirement institutions, which generally avoids the personal 60-day deadline.

The 20% Withholding Trap

If an eligible taxable distribution from an employer retirement plan is paid directly to you, the plan generally must withhold 20% for federal income tax, even if you intend to roll the distribution over later.

To defer tax on the entire taxable portion, you usually need to add money from other sources equal to the amount withheld before the rollover deadline.

If the plan has already issued a check, the payee line changes what happens next. See what to do when a 401(k) rollover check is made out to you, including how to tell a paid-to-you distribution from a direct rollover check that was simply mailed to your address.

The One-Per-Year IRA Rollover Rule

The IRS generally limits certain IRA-to-IRA indirect rollovers to one per 12-month period across your IRAs. This rule is separate from the 60-day rule.

The one-per-year rule generally does not apply to trustee-to-trustee transfers, traditional-to-Roth conversions, or rollovers from qualified employer plans to IRAs. Still, confirm the transaction type before you move money.

Can the IRS Waive the 60-Day Deadline?

Sometimes. The IRS may waive the 60-day requirement if you missed the deadline because of circumstances beyond your reasonable control. IRS guidance also allows certain taxpayers to self-certify to a receiving institution that they qualify for a waiver.

Examples can include financial institution error, misplaced checks, serious illness, death in the family, postal error, disaster, or certain state unclaimed property fund situations. Self-certification is not the same thing as an IRS ruling, so keep documentation and get tax help when stakes are high.

Under Revenue Procedure 2020-46, a qualifying taxpayer can give the receiving plan or IRA trustee a written self-certification. The late rollover contribution must be made as soon as practicable after the reason for the delay no longer prevents the rollover; IRS guidance says a contribution made within 30 days is ordinarily treated as satisfying that timing condition. Self-certification is not an IRS waiver and can still be reviewed on audit.

If you do not qualify for an automatic waiver or self-certification, you can request an IRS waiver through a private letter ruling. A private letter ruling request carries a user fee, so get tax advice before choosing that route.

What the 60-Day Rule Does Not Cover

• Required minimum distributions: an RMD cannot be rolled over. The required amount must stay out of the rollover.
• Non-spouse inherited IRAs: a non-spouse beneficiary generally cannot roll amounts from an inherited IRA into their own IRA. A trustee-to-trustee transfer can be permitted when the inherited account remains in the deceased owner’s name for the beneficiary.
• IRA withholding: an IRA distribution paid to you is generally a nonperiodic payment with a 10% default federal withholding rate under Form W-4R, which can generally be changed or reduced to zero when permitted. This is different from the mandatory 20% rule for eligible employer-plan rollover distributions paid to you.
• Tax reporting: a 60-day rollover is generally reported with Form 1099-R from the distributing institution and Form 5498 from the receiving IRA. See the IRA rollover tax guide.
• State withholding: state income-tax withholding can also reduce a check, so a simple “divide by 0.80” shortcut is not reliable unless federal 20% withholding was the only reduction.

How to Avoid the Trap

1. Ask your old plan or IRA custodian for direct rollover instructions.
2. Open the receiving IRA before requesting the transfer.
3. Make sure checks are payable to the new custodian for benefit of you, not to you personally.
4. Keep copies of every form, confirmation number, and mailing receipt.
5. Do not spend, invest, or park rollover money in a personal bank account.
6. Ask a tax professional before attempting an indirect rollover.

Frequently Asked Questions