Don't you hate it when one bad apple ruins things for everyone else?
Well, Alvan Bobrow was just that bad apple who ruined it for everyone else on the ability to rollover each IRA account once per year. He tried to push things too far and take advantage of the rules.
Are you thinking about rolling over money from one IRA to another?
Be careful if you are because as a result of the recent Bobrow Tax Court Case decision, the IRS has tightened up the rules and you are only allowed one rollover per year for all of your IRA accounts, not one per account as was previously allowed.
How will these changes affect you? Well, the latest IRS guidance issued in Announcement 2014-32 clarify what you need to know:
- The stricter once-per-year IRA rollover rule will be enforced for you beginning on January 1, 2015.
- If you took any IRA distributions in 2014 to be rolled over, these will not count towards your once-per-year limitation in 2015 under the new rules.
- If you have both regular and Roth IRA accounts, beware! If you do a rollover from any one of them, that's it! So, if you rollover money from one Roth IRA account to another Roth IRA account, you cannot do a second rollover the same year involving your traditional IRA accounts. The new rule applies in aggregate to all IRAs, this includes traditional IRAs and Roth IRAs.
- A trustee-to-trustee transfer is always the best way for you to move the money from one custodian to another.
- Please note that if you have one custodian send you a check that is made payable to the new custodian, this will also be treated as if you made a trustee-to-trustee transfer.
- Going forward, you need to be careful. Starting with the 2015 distributions, once you get past the 2014 exception, you will not be able to roll over any IRA distribution if you received an IRA distribution and rolled it over in the preceding one year period.
If you wish to discuss these rules in more detail or have a situation that you need some help with clarifying the rules, please do not hesitate to call the office at 914-997-7724 and set up an appointment.