An IRA rollover occurs when a taxpayer receives a distribution from one IRA and within 60 days deposits the assets into another IRA. This transfer to the receiving IRA is called a rollover contribution. Any portion of the distribution not rolled over within 60 days is taxed on the date it was received, not on the 60th day after the withdrawal.
Generally, if any part of a distribution from an IRA is rolled over tax-free to another IRA, you must wait one year before you can make another tax-free rollover. Before 2015, the one-rollover-per-year rule applied on a per-IRA basis. Starting in 2015, the one-rollover-per-year rule applies to an individual’s IRAs in the aggregate (rather than on a per-IRA basis). Thus, from now on, individuals who withdraw IRA funds and roll them over tax-free to another IRA can’t withdraw funds from any other IRA during the following 12 months and complete another tax-free rollover. A 2014 distribution properly rolled over in 2015 will not count toward the new one-rollover-per-year rule that’s effective starting in 2015.
Trustee-to-trustee transfers are preferable because they are not subject to the one-year waiting period that applies to rollovers to and from IRAs. Also, since the IRA owner never takes possession of the assets, there is no danger that the distribution will be taxed because it is not rolled over within the required 60-day period.
Roth IRAs and traditional IRAs are basically subject to the same rollover rules. However, a Roth IRA can only be rolled over to another Roth IRA. A traditional IRA can be rolled over to a Roth IRA, but it is taxable as if it were not rolled over.
Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have any questions or would like more information.