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What is an IRA Rollover?
When might I use an IRA Rollover?
What are the requirements for an IRA Rollover?
What is an IRA Rollover?
An IRA Rollover does not involve current income tax deductions,
but rather is a method through which tax-favored retirement plan
assets can be transferred from one plan to another plan without
incurring any current income tax liability.
When might I use an IRA Rollover?
- IRA-to-IRA Rollover: Used to transfer funds from one IRA to
another IRA and retain their tax-favored status.
- Qualified Plan-to-IRA Rollover: Used to receive distributions
from an employer-sponsored qualified retirement plan and continue
to defer taxation.
- Conduit IRA Rollover: Used to receive distributions from an
employer-sponsored qualified retirement plan and maintain their
tax-favored status until the distributions are rolled back into
another employer-sponsored qualified retirement plan.
- Spousal Rollover: A surviving spouse can roll over the proceeds
of an inherited IRA and continue to defer income taxation.
- Conversion of a Regular IRA to a Roth IRA: Amounts in a Regular
IRA can be rolled over to a Roth IRA if the taxpayer's adjusted
gross income does not exceed $100,000. While income taxes must
be paid on amounts rolled over to a Roth IRA in the year of the
rollover, there is no premature withdrawal penalty tax.
What Are the Requirements for an IRA Rollover?
Generally, on IRA-to-IRA Rollover is allowed each year and the amount
rolled over can contain no funds other than those received from
the distibutin IRA. In addition, the rollover must be completed
within 60 days after the funds are received from the distributing
IRA. A spousal IRA Rollover must meet the same general requirements.
Distribution from qualified retirement plans must be rolled over
within 60 days following receipt of the distribution. In order to
avoid the required 20% tax withholding requirement on qualified
plan distributions, it is generally advisable to request a direct
transfer of the funds from the trustee of the qualified plan to
the IRA trustee.
IRA Rollover requirements can be complex. Depending on the original
source of the funds and the objectives of the IRA Rollover, different
requirements may apply. You should seek professional tax advice
before implementing an IRA Rollover in order to avoid unforeseen
and/or negative tax consequences.
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