How to Get a Waiver of the 60-Day Rollover Requirement

When moving funds from one retirement account to another, the Internal Revenue Code provides a 60-day window to complete the transaction without tax consequences. If you receive a distribution from an IRA or an employer-sponsored plan, you have 60 days from the date you receive the funds to deposit them into another eligible retirement account. Failing to meet this deadline can have significant financial repercussions. The entire distribution amount could be treated as taxable income for that year, and for individuals under the age of 59½, an additional 10% early withdrawal penalty may also apply. The Internal Revenue Service (IRS) recognizes that circumstances can prevent a timely rollover and provides a way to request a waiver of the 60-day requirement.

Qualifying Reasons for a Waiver

The IRS provides specific, acceptable reasons for failing to complete a rollover within the 60-day timeframe. These reasons, outlined in Revenue Procedure 2016-47, cover situations that are generally beyond a person’s reasonable control. The IRS allows for a waiver if the failure to meet the deadline would be against equity or good conscience. Approved circumstances include:

• An error committed by the financial institution making the distribution or the one intended to receive the funds.
• A distribution check that was misplaced and never cashed.
• The death of a family member.
• A serious illness affecting you or a family member.
• Severe damage to your principal residence.
• Incarceration or restrictions imposed by a foreign country.
• A postal error that resulted in a delay in delivering the rollover check.
• A distribution that was deposited into an account the taxpayer mistakenly believed was an eligible retirement plan.
• A distribution made because of an IRS levy where the proceeds were later returned to the taxpayer.
• A delay by the distributing party in providing information needed to complete the rollover.
• A distribution made to a state’s unclaimed property fund, as added by Revenue Procedure 2020-46.

The Self-Certification Method

For individuals whose situation aligns with one of the IRS-approved reasons, the self-certification method offers a direct path to making a late rollover contribution without first obtaining formal IRS approval. It is a more accessible alternative to the formal private letter ruling process, as it does not require paying a user fee to the IRS.

To use this method, three conditions must be met. The IRS must not have previously denied a waiver request for the same rollover. The reason for missing the 60-day deadline must be one of the circumstances specified by the IRS. The late rollover contribution must be made to the new plan or IRA as soon as practicable after the reason for the delay no longer exists; a contribution made within 30 days is generally considered to meet this requirement.

The core of the self-certification process is a written letter provided to the plan administrator or IRA custodian that will receive the late deposit. The IRS provides a model letter that can be used as a template. This letter must state the amount and date of the distribution, identify the specific reason for the delay, and certify that all other requirements for a valid rollover have been met.

Upon receiving a properly completed self-certification letter, the financial institution can accept the late rollover contribution. The institution is permitted to rely on the certification unless it has actual knowledge to the contrary. The IRS retains the right to review the validity of the rollover during a future examination of your tax return.

Requesting a Private Letter Ruling

When a taxpayer’s reason for missing the 60-day deadline is not one of the situations covered by self-certification, the only remaining option is to request a private letter ruling (PLR) from the IRS. A PLR is a formal, written determination that interprets and applies tax laws to a specific set of facts. This process is considerably more complex, time-consuming, and expensive than self-certification.

The request must include a thorough explanation of all the facts and circumstances that led to the failure to complete the rollover on time. This includes providing supporting documentation, such as bank statements to show the funds were not used for other purposes, copies of death certificates, or letters from physicians detailing a serious illness.

Submitting a PLR involves sending the request to the IRS with a significant user fee, which is required regardless of the outcome. The standard fee is $43,700, but reduced fees are available for taxpayers with lower gross incomes. For individuals with gross income under $250,000, the fee is $3,450, while those with gross income between $250,000 and $1 million pay $9,775. After submission, the process can take several months, and if the ruling is favorable, the taxpayer is typically given 60 days from the date of the letter to complete the rollover.