To date, IRS has issued hundreds of favorable Private Letter Rulings waiving the 60- day rollover rule and allowing more time to complete the rollover. IRS is also increasingly denying some rulings when there was no intent to do a rollover, for example when the IRA owner withdrew money from the IRA for other purposes (not to roll the funds back over), when the funds were used during the 60 days, and when the taxpayer could have done a rollover but didn’t (the control test).
Rollover Basics
One of the problems with rollovers is the terminology. It seems that whenever IRA or plan money is moved from one IRA or plan to another, we call it a rollover, even if it isin fact a direct, trustee-to-trustee transfer. Even above, we said that a trustee-to-trustee transfer is sometimes referred to as a “direct rollover.” Given the definition of a rollover as something that is not a direct transfer, then how could anyone possibly use the term “direct rollover?” That’s tax-speak, and we agree it’s confusing.
For our discussion here, we won’t use that term. We will stick with either direct transfer or trustee-to-trustee transfer, and when we are referring to taking a distribution and contributing those funds to the same or another IRA or plan, we will use the term “rollover” because that’s what a rollover is. Also, to make this discussion easier to digest, we will just use the term “IRA” (rather than plan or IRA) since the same rules generally apply to distributions from plans. In cases where the rules are different for plan distributions, we will point that out.