Rollover IRA – 3 Easy Steps

Rolling over a previous 401(k) or existing IRA to an Equity Trust self-directed IRA in three easy steps.
  1. Open an Equity Trust Self-Directed IRA,
  2. Rollover your IRAs to the newly opened account,
  3. Choose your investments.

What You Need to Know about Rollovers

An IRA-to-IRA rollover occurs when you take an IRA distribution in your personal possession and deposit the funds and/or assets back into the same type of IRA within 60 days of the date from which you received the funds. Returning the funds back to the same type of IRA allows you to avoid tax on the distribution and a possible 10% penalty tax.

Can I roll over a traditional IRA distribution if I am over age 70½?

There is no age restriction on rollovers, however if you hold a traditional IRA and are age 70½ or older you cannot rollover your required minimum distribution (RMD). The first assets or funds distributed in a year are considered to be the RMD. After satisfying the required minimum distribution, any additional distributions are eligible for rollover provided you follow the 12 month period rule.

When does the 60-day period begin?

Generally, a rollover of cash or other assets from one retirement account to another is a tax-free distribution to you as long as you deposit the cash and assets distributed into another IRA. This type of deposit is considered a contribution or you may have heard this called a “rollover contribution.”

The rollover contribution must be deposited into the IRA by the 60th day after the day you receive the distribution from your IRA or your employer's plan. The day following the day of receipt is considered day one.  There are no rules with the IRS granting an extension of the 60-day period if the 60th day falls on a Saturday, Sunday, or legal holiday.  It is safest to count sixty calendar days from the time you receive the funds and assume there are no exceptions to which the 60th day falls.
 
Remember: The date the funds were disbursed and sent from the IRA does not start the 60 day period.  It starts on the 60-day period. If the rollover is not completed within 60 days, the portion of the distribution not deposited into an IRA must be reported as income for the calendar year in which the distribution occurred.

Speak with your tax or financial advisor if you have concerns or questions about completing a rollover within the 60-day period.  Here are some possible exceptions:

What type of tax forms will I receive when I do a rollover?

A 1099 tax form is issued for the distribution and the receiving institution reports the rollover on a 5498 tax form. If the rollover is less than the original distribution amount, you must report the difference as part of your federal tax return. Funds that are not deposited into an IRA as a contribution are considered income. Taxes and penalties may occur if you do not meet the distribution requirements for the type of IRA you hold.        

How does a financial organization know if a contribution is a rollover?

You, the IRA owner, must inform your IRA custodian the contribution is a rollover or that the funds/assets are from another IRA. The rollover action is irrevocable, meaning it cannot be changed or undone once you start the process.

How many times can I do a rollover for my IRA funds/assets?

You are allowed to do one rollover per 12-month period per IRA.

The 12-month period begins on the date you receive the funds/assets, not the date the funds/assets were sent to you from your IRA custodian.  The 12-month period does not start on the date you return the funds/assets back to the IRA as a contribution.

If a second distribution is made during the 12-month period it will not be eligible for rollover. This means the distribution is a taxable event and is subject to the 10% penalty tax, if applicable. In addition those funds are invalid to deposit to the account as a rollover contribution. They will be treated as a regular contribution for the current year, which result in an excess contribution.

Does my IRA custodian monitor the 60-day and 12-month periods?

No.  It is your responsibility to monitor the 60-day period and 12-month period when you do a rollover.