Before January 1, 2015, an individual could rollover a distribution from one IRA to another IRA in a nontaxable transaction if the rollover was completed within 60 days after the income was received. This could be done only once in any 1-year period. However, it was determined on an IRA-by-IRA basis. Starting January 1, 2015, the nontaxable distribution on rollover rule will be applied on an aggregate basis. So, no matter how many IRA accounts a person has, only one nontaxable rollover per year will be allowed.
Alright, follow me if you will, the previous paragraph simply stated says: if an individual had multiple IRAs, any or all of those IRAs could be rolled over into another IRA in a nontaxable event as long as it was completed within 60 days of the distribution. But, only once for each IRA in a 1-year period, and the same IRA can’t be used twice. Now, starting January 1, 2015, the one-a-year rule is going to be taken in the aggregate. Meaning, no matter how many IRA accounts an individual has, only one IRA account can be rolled over into another IRA account in a nontaxable transaction per 1-year period. Not to worry, there is a transitional rule for distributions in 2015. A distribution in 2014 that was rolled over will not count towards a rollover within the preceding year as long as the 2015 IRA distribution is from a different account than what was used in 2014.
Conversion rollovers from a traditional IRA to a Roth IRA, trustee-to-trustee rollovers, and rollovers to or from qualified plans are not subject to the above one-a-year rollover rules. The best way to go is to use trustee-to-trustee rollovers whenever possible so that multiple rollovers within a 1-year period can be accomplished. The trustee of your current IRA can transfer amounts directly to your new/other IRA account or they can provide a distribution check made payable to the receiving IRA trustee.
Please contact us if you have any questions or concerns.
From your Bangor, Maine Accountants.