IRA Rollover Tax Changes for 2015

Effective January 1, 2015, there is a new tax change to IRA rollovers and if done incorrectly, your entire IRA account could be subject to tax. A common question we get is, “What are the tax implications involved in doing IRA rollovers?”. Some examples of IRA rollovers are consolidating accounts, moving jobs or inheriting a deceased spouse or family member’s IRA.  

There are two types of IRA rollovers, a Direct Rollover (also known as a Direct Transfer) and an Indirect Rollover. A Direct Rollover is when funds are transferred directly from one IRA or retirement plan to another IRA or retirement plan and the transfers between IRAs can be made at any time. An Indirect Rollover is when distributions are made from an IRA or retirement plan and paid directly to the individual. In the past, if funds were re-deposited into a qualified IRA or retirement plan within 60 days, there were no taxes due on the distribution. Beginning this year, only one 60-day rollover between IRAs may be completed per year per individual. For example, regardless of how many IRAs you have, you can only do one 60-day rollover a year. If a second rollover is done, it all becomes taxable.

I have two simple recommendations: 1) do not do an indirect rollover and 2) make sure the financial professionals you are working with understand these tax changes. If you have questions, you can always find the help you need at Cornerstone Retirement Group by giving us a call (775) 853-9033.