Roll Over Beethoven – You’re Limited to One Tax-Free IRA Rollover Per Year

Chuck Berry wrote, “Roll over Beethoven and tell Tschaikowsky the news.” The song refers to how the pioneer of rock and roll thought classical composers might roll over in their graves upon hearing the new rock sound. And, while the Tax Court’s interpretation of how the statutory one-per-year limit now means you only get one tax-free IRA-to-IRA rollover per year is probably not going to cause anyone to roll over in their grave, some may find it shocking, or at least disadvantageous, or at the very least confusing.

IRA is an acronym for an Individual Retirement Account. When referring to a rollover IRA, it generally means the moving of money from one qualified retirement plan to another. There are two types of rollovers, direct and indirect. An indirect rollover liquidates your IRA and sends you a check, which you should then deposit into a new IRA of your choice. A direct rollover occurs when you have a trustee move your funds from one account to another, without your hands-on assistance.

Right now, and through the remainder of 2014, you get one tax-free IRA-to-IRA rollover each year for each different IRA you own. Beginning January 1, 2015, you will receive only one tax-free rollover period. The limit will apply by aggregating all of an individual’s IRAs, effectively treating them as if they were one IRA for the purposes of applying the limit.

This one-per-year limit does not apply, though, to other types of rollovers, including a rollover from a traditional IRA to a Roth IRA, or a rollover from a qualified plan to an IRA, or to direct rollovers from one IRA trustee to another.

Failure to properly follow IRS rollover rules can land you with serious tax penalties. By the time you realize you have a problem, it may be too late to fix. Let the professionals at Nielsen Law Group keep you informed as to possible tax consequences associated with IRA rollovers. Call (480) 888-7111 or submit a web request here.