The IRS, likely hoping to reduce the number of letter ruling requests related to late IRA rollovers, has released Revenue Procedure 2016-47 that provides automatic relief for certain late rollovers of IRAs and qualified plan distributions. The procedure generally allows a plan administrator, IRA custodian or trustee to rely upon a certification from a taxpayer in accepting a rollover from a taxpayer that he/she meets certain requirements qualifying for automatic relief from late rollovers. However, if the administrator, custodian or trustee is aware the certification is not correct, he/she will not be allowed to rely on the certification.
Previously Revenue Procedure 2013-16 provided for automatic relief only in limited situations related to errors committed by financial institutions. Otherwise a taxpayer generally had to apply and pay for a private letter ruling granting relief.
Under the new procedure a taxpayer makes a certification meeting certain requirements outlining the taxpayer’s qualification for automatic relief under this procedure. The IRS is providing a model certification, found at the end of this article, the taxpayer may use word for word. Otherwise the taxpayer must provide a letter that is materially similar in all respects.
The taxpayer issuing the certification may not have been previously denied relief by the IRS in a waiver request for the distribution in question.
The taxpayer must have missed the rollover deadline due to one of the following reasons:
(a) an error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;
(b) the distribution, having been made in the form of a check, was misplaced and never cashed;
(c) the distribution was deposited into and remained in an account that the taxpayer mistakenly thought was an eligible retirement plan;
(d) the taxpayer’s principal residence was severely damaged;
(e) a member of the taxpayer’s family died;
(f) the taxpayer or a member of the taxpayer’s family was seriously ill;
(g) the taxpayer was incarcerated;
(h) restrictions were imposed by a foreign country;
(i) a postal error occurred;
(j) the distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; or
(k) the party making the distribution to which the rollover relates 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 taxpayer must make the contribution to the IRA as soon as practicable after the reasons stated no longer prevent the taxpayer from the completing the rollover. If the taxpayer completes the rollover within 30 days after the reasons no longer prevent the rollover.
The Form 5498 will be modified to indicate that the custodian has accepted a rollover after the 60 day deadline.
The IRS explains the affect on the taxpayer as follows:
A self-certification is not a waiver by the IRS of the 60-day rollover requirement. However, a taxpayer may report the contribution as a valid rollover unless later informed otherwise by the IRS. The IRS, in the course of an examination, may consider whether a taxpayer’s contribution meets the requirements for a waiver. For example, the IRS may determine that the requirements for a waiver were not met because of a material misstatement in the self-certification, the reason or reasons claimed by the taxpayer for missing the 60-day deadline did not prevent the taxpayer from completing the rollover within 60 days following receipt, or the taxpayer failed to make the contribution as soon as practicable after the reason or reasons no longer prevented the taxpayer from making the contribution. In such a case, the taxpayer may be subject to additions to income and penalties, such as the penalty for failure to pay the proper amount of tax under § 6651.
The IRS may also grant a late rollover waiver during the course of an exam after determining the taxpayer meets the requirements for relief.
The IRS example certification for relief is provided below:
Certification for Late Rollover Contribution
City, State, ZIP Code
Plan Administrator/Financial Institution
City, State, ZIP Code
Dear Sir or Madam:
Pursuant to Internal Revenue Service Revenue Procedure 2016-47, I certify that my contribution of $ [ENTER AMOUNT] missed the 60-day rollover deadline for the reason(s) listed below under Reasons for Late Contribution. I am making this contribution as soon as practicable after the reason or reasons listed below no longer prevent me from making the contribution. I understand that this certification concerns only the 60-day requirement for a rollover and that, to complete the rollover, I must comply with all other tax law requirements for a valid rollover and with your rollover procedures.
Pursuant to Revenue Procedure 2016-47, unless you have actual knowledge to the contrary, you may rely on this certification to show that I have satisfied the conditions for a waiver of the 60-day rollover requirement for the amount identified above. You may not rely on this certification in determining whether the contribution satisfies other requirements for a valid rollover.
Reasons for Late Contribution
I intended to make the rollover within 60 days after receiving the distribution but was unable to do so for the following reason(s) (check all that apply):
___ An error was committed by the financial institution making the distribution or receiving the contribution.
___ The distribution was in the form of a check and the check was misplaced and never cashed.
___ The distribution was deposited into and remained in an account that I mistakenly thought was a retirement plan or IRA.
___ My principal residence was severely damaged.
___ One of my family members died.
___ I or one of my family members was seriously ill.
___ I was incarcerated.
___ Restrictions were imposed by a foreign country.
___ A postal error occurred.
___ The distribution was made on account of an IRS levy and the proceeds of the levy have been returned to me.
___ The party making the distribution delayed providing information that the receiving plan or IRA required to complete the rollover despite my reasonable efforts to obtain the information.
I declare that the representations made in this document are true and that the IRS has not previously denied a request for a waiver of the 60-day rollover requirement with respect to a rollover of all or part of the distribution to which this contribution relates. I understand that in the event I am audited and the IRS does not grant a waiver for this contribution, I may be subject to income and excise taxes, interest, and penalties. If the contribution is made to an IRA, I understand you will be required to report the contribution to the IRS. I also understand that I should retain a copy of this signed certification with my tax records.