Life and Death Planning for Retirement Benefits

Chapter 2: Income Tax Issues

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reasons waivers have been granted (or denied). Note that some of these situations would now qualify to use the self-certification procedure ( ¶ 2.7.06 ). The tragedy is that, in most of these hardship waiver-seeking cases, if the participant had just read his account statements when they came in, he would have discovered the mistake immediately and been able to fix it within the 60-day deadline. A. Waiver granted for error by financial institution . This is by far the most common reason for obtaining a deadline waiver. The IRS always grants the waiver when the participant missed the deadline due to a processing error by a financial institution. Generally the IRS seems to require the financial institution to admit the mistake in writing. Typical are rulings in which the financial institution inadvertently established a regular taxable account instead of an IRA with funds transferred from a prior advisor or institution; see, e.g. , PLRs 2004- 02028, 2004-04053, 2004-01023, 2004-20035, 2010-14073. Financial institution informed taxpayer and her advisor (twice) that her account was not an IRA. The account statement did not reveal it was an IRA. So when taxpayer withdrew the money and transferred it to another institution, she did not put it into an IRA. Two years later the first institution informed her—actually it was an IRA! Late rollover allowed. PLR 2014-16013. With the assistance of a representative of the bank, in 2008, taxpayer completed the form for creating a rollover traditional IRA and deposited her rollover check. The form “clearly indicated” the intent to roll into a traditional IRA. Instead, the bank put the money into a Roth IRA, a mistake that was not discovered until 2013, when the certificate of deposit matured. Late rollover allowed (for the original rollover amount, not the five years’ worth of earnings). PLR 2015-24027. Financial institution was supposed to transfer taxpayer’s required minimum distribution from her IRA to her taxable account. Which it did. In fact they did it twice, due to a coding mistake. Taxpayer didn’t notice the mistaken double distribution until the following year. Late rollover of second distribution allowed. PLR 2014-29032. If your facts sound like the facts in those three PLRs, then you qualify for the self- certification procedure. In the above examples, there were big obvious financial institution goofs, and the institutions admitted their mistakes. B. Waiver granted: Distribution was not requested (or not understood) by taxpayer . In many successful hardship waiver requests to the IRS, the original distribution was “involuntary,” in that the participant hadn’t requested it and often did not even realize it had occurred (PLRs 2004-21009, 2004-21008, 2004-36014, 2010-15040, 2010-16093) or the participant was mentally impaired and thus unable to understand the consequences of withdrawing the funds (PLR 2009-36048) or to understand the applicable paperwork (PLR Here are three examples out of the hundreds of financial institution blunders that have justified IRS waivers.