“Ask Your Attorney” Column

Ask Your Attorney

About The IRS Rollover Deadline On Withdrawals From Your IRA

Dear Counselor: I recently closed out my IRA account held by a former employer, and took the money myself. I was intending to roll the money into another IRA, but instead had to spend the money to pay for the cost of a medical emergency. I’m concerned about getting penalized. What can I do?

Dear Client: Generally, you have to roll the money into another IRA by the 60th day after you received your distribution. As you know, you do not have to pay tax on an IRA distribution if you roll it over to another IRA [or back into the original IRA]. So, if you do not want to pay tax and any penalty, you have to come up with the funds to make the deposit into another IRA. However, if you are already past the 60 day deadline, then there still may be something you can do. The IRS can extend the 60-day deadline where the failure to complete the rollover is due either: (a) to an error by a financial institution; or (b) to some events that took place beyond your reasonable control — such as an illness, hospitalization, or a natural disaster. So, if you have a good reason, go ahead and ask for the extension, because the IRS has been liberal in granting them. However, you do have to convince them that it would be “against equity or good conscience” not to give you a break — so do a good job in giving them a full explanation. And, if you need help, just give us a call and let us help you frame your argument.

John L. Maier, Jr.

Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121