Income Taxes

IRA Rollovers Become IRS Target

On March 28 I wrote a post about a U.S. tax court altering the rules on IRA to IRA  rollovers and wondered when the IRS would officially change the rules and start enforcement.  Previously according to publication 590 and several IRS letter rulings a taxpayer could rollover each IRA account IRA to IRA once per year- per account.  The tax court changed this long standing precedent by limiting each taxpayer to one 60 day IRA to IRA rollover per year.  No matter how many IRA accounts a taxpayer owns they are now limited to only one rollover per year.

On January 1, 2015 the IRS will begin enforcing this new interpretation.  In order to avoid scrutiny a taxpayer should do all IRA rollovers as institution to institution direct transfers.  These direct transfers will remove all IRS questions and prevent a taxpayer for enduring audit, extra paperwork, penalties and unintentionally taxation of IRA funds.

For more background please read the previous post-    IRA Rollover Rules Altered by Tax Court

Going forward a taxpayer should consult a well informed professional prior to doing any IRA rollovers.