The Surprise US Tax Court IRA Ruling and What Does this Mean to You?

This is not the first time I have mentioned the IRS Publication 590, the publication that lays out all the rules
regarding IRA’s. This document tells the entire financial industry (including tax advisors) what you can and cannot do with your IRA.
So you can imagine the surprise, when the US Tax Court issued a ruling that directly contradicts what we have read in Publication 590 for over 20 years.

 The IRS’ Publication 590, has allowed an individual, if they have
multiple IRA’s,  the right to do a 60-day rollover once per 12 month
period
for each IRA they own.

Yet, the US Tax Court just ruled that the 12 month rollover rule applies not to each individual IRA, but to all of your IRA’s as a group. Click here for more on this story and how this ruling cost one couple over $50,000.


So, you are probably wondering, what does this mean to you, and how do you make sure this doesn’t happen to you?

The simplest way for you to avoid this new IRS trap is to
transfer your IRA funds directly from one institution to the next.  As long as
they maintain their IRA titling, you
can still do unlimited fund transfers between institutions.

  •  That means you can move your IRA from bank A to bank B to bank C to
    brokerage firm D and so on provided they are all IRA accounts.
  • If any one of them are NOT an IRA account, you have used up your
    one “rollover” and you must wait 12 months before doing another “rollover”.

The biggest lesson here is that this can easily lead to unintended tax bills and an unintended tax bill on an IRA (often large accounts) can be very significant.

When it comes to your retirement accounts, seemingly small things can end up costing you thousands. If you would like to speak with a retirement planning specialist, one you can have on your side
whenever you are making decisions with your IRA call our office (775) 853-9033.