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What is an IRA Rollover?

An IRA Rollover does not involve current income tax deductions, but rather is a method through which tax-favored retirement plan assets can be transferred from one plan to another plan without incurring any current income tax liability.

When might I use an IRA Rollover?

  • IRA-to-IRA Rollover: Used to transfer funds from one IRA to another IRA and retain their tax-favored status.
  • Qualified Plan-to-IRA Rollover: Used to receive distributions from an employer-sponsored qualified retirement plan and continue to defer taxation.
  • Conduit IRA Rollover: Used to receive distributions from an employer-sponsored qualified retirement plan and maintain their tax-favored status until the distributions are rolled back into another employer-sponsored qualified retirement plan.
  • Spousal Rollover: A surviving spouse can roll over the proceeds of an inherited IRA and continue to defer income taxation.
  • Conversion of a Regular IRA to a Roth IRA: Amounts in a Regular IRA can be rolled over to a Roth IRA if the taxpayer’s adjusted gross income does not exceed $100,000. While income taxes must be paid on amounts rolled over to a Roth IRA in the year of the rollover, there is no premature withdrawal penalty tax.

What Are the Requirements for an IRA Rollover? 

 Generally, on IRA-to-IRA Rollover is allowed each year and the amount rolled over can contain no funds other than those received from the distibutin IRA. In addition, the rollover must be completed within 60 days after the funds are received from the distributing IRA. A spousal IRA Rollover must meet the same general requirements.

Distribution from qualified retirement plans must be rolled over within 60 days following receipt of the distribution. In order to avoid the required 20% tax withholding requirement on qualified plan distributions, it is generally advisable to request a direct transfer of the funds from the trustee of the qualified plan to the IRA trustee.

IRA Rollover requirements can be complex. Depending on the original source of the funds and the objectives of the IRA Rollover, different requirements may apply. You should seek professional tax advice before implementing an IRA Rollover in order to avoid unforeseen and/or negative tax consequences.