Life and Death Planning for Retirement Benefits

Chapter 2: Income Tax Issues

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in the Rev. Proc. that can be used (as is or modified) to self-certify qualification for the 60-day waiver. To qualify for self-certification, you must meet three requirements. First, you must not have been previously denied a waiver by the IRS for this particular distribution (see ¶ 2.7.07 ). Second, you must have been unable to complete the rollover due to one or more of the 11 reasons in the following list. Third, you must complete the rollover as soon as practicable after the reason(s) that prevented you from completing it no longer prevent you. Completing the rollover within 30 days after the “reasons no longer prevent you” will automatically be deemed to comply with condition #3. Here is the menu of reasons justifying the waiver based on the self-certification procedure, together with a cite to the section of this book (if any) discussing PLRs dealing with that particular hardship: 1. An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates. See ¶ 2.7.07 (A). 2. The distribution was made in the form of a check which was misplaced and never cashed. See ¶ 2.7.03 . 3. The distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan. 4. The taxpayer’s principal residence was severely damaged. 5. A member of the taxpayer’s family died. See ¶ 2.7.07 (C). 6. The taxpayer or a member of the taxpayer’s family was seriously ill. See ¶ 2.7.07 (C). 7. The taxpayer was incarcerated. 8. Restrictions imposed by a foreign country. 9. Postal error. 10. The distribution was made on account of an IRS levy under § 6331 and the proceeds of the levy have been returned to the taxpayer. 11. The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information. The self-certification procedure is not invulnerable. If the IRS audits your return, and finds that (for example) you made a material misstatement in your certification, or the reason(s) you claimed did not in fact prevent you from completing the rollover, or you did not complete the rollover as soon as practicable once the reasons were removed, the IRS can take away the waiver of the 60-day deadline. In that case you will of course be in big trouble: You will owe income taxes on the late-rolled distribution, plus penalties for an excess contribution to the receiving plan, plus interest and penalties on the foregoing. How will the IRS ever know that you used the self-certification procedure? Don’t count on “audit roulette” to protect you from IRS scrutiny on this issue. The IRS has revised Form 5498 (starting in 2017), now telling the IRA provider to check box 13a if any rollover contribution came