Traditional IRA rules permit you to transfer, tax free, assets
(money or property) from other retirement programs (including
traditional IRAs) to a traditional IRA. The rules permit the following
kinds of transfers.
- Transfers from one trustee to another.
- Transfers incident to a divorce.
This chapter discusses all three kinds of transfers.
Transfers to Roth IRAs.
Under certain conditions, you can move assets from a traditional
IRA to a Roth IRA. See the discussion at Can I Move Amounts Into
a Roth IRA? in chapter 2.
A transfer of funds in your traditional IRA from one trustee
directly to another, either at your request or at the trustee's
request, is not a rollover. Because there is no
distribution to you, the transfer is tax free. Because it is not a
rollover, it is not affected by the 1-year waiting period required
between rollovers, discussed later under Rollover From One IRA
For information about direct transfers from retirement programs
other than traditional IRAs, see Direct rollover option,
later in this chapter.
Generally, a rollover is a tax-free distribution to you of cash or
other assets from one retirement plan that you contribute to another
retirement plan. The contribution to the second retirement plan is
called a "rollover contribution."
The amount you roll over tax free is generally taxable later when
the new plan distributes that amount to you or your beneficiary.
Kinds of rollovers to an IRA.
There are two kinds of rollover contributions to a traditional IRA.
In one, you put amounts you receive from one traditional IRA into the
same or another traditional IRA. In the other, you put amounts you
receive from an employer's qualified retirement plan for its employees
into a traditional IRA.
Treatment of rollovers.
You cannot deduct a rollover contribution, but you must report the
rollover distribution on your tax return as discussed later under
Reporting rollovers from IRAs and Reporting rollovers
from employer plans.
A written explanation of rollover treatment must be given to you by
the plan making the distribution.
Time Limit for Making
a Rollover Contribution
You must make the rollover contribution by the 60th day after the
day you receive the distribution from your traditional IRA or your
employer's plan. However, see Extension of rollover period,
Rollovers completed after the 60-day period.
Amounts not rolled over within the 60-day period do not qualify for
tax-free rollover treatment and you must treat them as a taxable
distribution from either your IRA or your employer's plan. The amount
not rolled over is taxable in the year distributed, not in the year
the 60-day period expires. You may also have to pay a 10% tax on early
distributions as discussed later under Early Distributions.
Treat a contribution after the 60-day period as a regular
contribution to your IRA. Any part of the contribution that is more
than the maximum amount you could contribute may be an excess
contribution, as discussed later under Excess Contributions.
Extension of rollover period.
If an amount distributed to you from a traditional IRA or a
qualified employer retirement plan becomes a frozen deposit
during the 60-day period allowed for a rollover, special rules extend
the rollover period.
The period during which the amount is a frozen deposit is not
counted in the 60-day period. The 60-day period cannot end earlier
than 10 days after the deposit is no longer frozen. To qualify under
these rules, the deposit must be frozen on at least one day during the
60-day rollover period.
This is any deposit that cannot be withdrawn from a financial
institution because of either of the following reasons.
- The financial institution is bankrupt or insolvent.
- The state where the institution is located restricts
withdrawals because one or more financial institutions in the state
are (or are about to be) bankrupt or insolvent.
Rollover From One IRA Into Another
You can withdraw, tax free, all or part of the assets from one
traditional IRA if you reinvest them within 60 days in the same or
another traditional IRA. Because this is a rollover, you cannot deduct
the amount that you reinvest in an IRA.
You may be able to treat a contribution made to one type of IRA as
having been made to a different type of IRA. This is called
recharacterizing the contribution. See Recharacterizations
in chapter 2
for more information.
Waiting period between rollovers.
You can take (receive) a distribution from a traditional IRA and
make a rollover contribution (of all or part of the amount received)
to a traditional IRA only once in any 1-year period. The 1-year period
begins on the date you receive the IRA distribution, not on the date
you roll it over into an IRA. This rule applies separately to each
traditional IRA you own.
If you have two traditional IRAs, IRA-1 and IRA-2, and
you roll over assets of IRA-1 into a new traditional IRA
(IRA-3), you may also make a rollover from IRA-2 into
IRA-3, or into any traditional IRA, within 1 year after the
rollover distribution from IRA-1. These are both allowable
rollovers because you have not received more than one distribution
from either IRA within 1 year. However, you cannot, within the 1-year
period, again roll over the assets you rolled over into IRA-3
into a traditional IRA.
If any amount distributed from a traditional IRA is rolled over tax
free, later distributions from that IRA within a 1-year period will
not qualify as rollovers. They are taxable and may be subject to the
10% tax on early distributions.
An exception to the 1-year waiting period rule has been granted by
the IRS for distributions made from a failed financial institution by
the Federal Deposit Insurance Corporation (FDIC) as receiver for the
institution. To qualify for the exception, the distribution must
satisfy both of the following requirements.
- It must not be initiated by either the custodial
institution or the depositor.
- It must be made because:
- The custodial institution is insolvent, and
- The receiver is unable to find a buyer for the
The same property must be rolled over.
You must roll over into a traditional IRA the same property you
received from your traditional IRA.
If you withdraw assets from a traditional IRA, you can roll over
part of the withdrawal tax free into a traditional IRA and keep the
rest of it. The amount you keep will generally be taxable (except for
the part that is a return of nondeductible contributions) and may be
subject to the 10% tax on premature distributions discussed later
under Early Distributions.
Amounts that must be distributed during a particular year under the
required distribution rules (discussed later) are not eligible
for rollover treatment.
If you inherit a traditional IRA from your spouse, you generally
can roll it over into a traditional IRA established for you, or you
can choose to make the inherited IRA your own as discussed earlier.
See Inherited IRAs under How Much Can Be
Contributed?. Also, see Distributions received by a
surviving spouse, later.
Not inherited from spouse.
If you inherited a traditional IRA from someone other than your
spouse, you cannot roll it over or allow it to receive a rollover
contribution. You must withdraw the IRA assets within a certain
period. For more information, see Beneficiaries, under
When Must I Withdraw IRA Assets?, later.
Reporting rollovers from IRAs.
Report any rollover from one traditional IRA to the same or another
traditional IRA on lines 15a and 15b of Form 1040, or on lines 11a and
11b of Form 1040A. Enter the total amount of the distribution on line
15a of Form 1040, or on line 11a of Form 1040A. If the total amount on
line 15a of Form 1040, or on line 11a of Form 1040A was rolled over,
enter zero on line 15b of Form 1040, or on line 11b of Form 1040A.
Otherwise, enter the taxable portion of the part that was not rolled
over on line 15b of Form 1040, or on line 11b of Form 1040A. See
Distributions Fully or Partly Taxable under Are
Rollover From Employer's Plan
Into an IRA
If you receive an eligible rollover distribution from
your (or your deceased spouse's) employer's qualified pension,
profit-sharing or stock bonus plan, annuity plan, or tax-sheltered
annuity plan (403(b) plan), you can roll over all or part of it into a
A qualified plan is one that meets the requirements of the Internal
Eligible rollover distribution.
Generally, an eligible rollover distribution is the taxable part of
any distribution of all or part of the balance to your credit in a
qualified retirement plan except:
- A required minimum distribution (explained later under
When Must I Withdraw IRA Assets? (Required
- Hardship distributions from 401(k) plans and certain 403(b)
- Any of a series of substantially equal periodic
distributions paid at least once a year over:
- Your lifetime or life expectancy,
- The lifetimes or life expectancies of you and your
- A period of 10 years or more.
The taxable parts of most other distributions are eligible
rollover distributions. See Maximum rollover, later. Also,
see Publication 575
for additional exceptions.
Written explanation to recipients.
The administrator of a qualified employer plan must, within a
reasonable period of time before making an eligible rollover
distribution, provide you with a written explanation. It must tell you
about all of the following.
- Your right to have the distribution paid tax free directly
to a traditional IRA or another eligible retirement plan.
- The requirement to withhold tax from the distribution if it
is not paid directly to a traditional IRA or another eligible
- The nontaxability of any part of the distribution that you
roll over to a traditional IRA or another eligible retirement plan
within 60 days after you receive the distribution.
- Other qualified employer plan rules, if they apply,
including those for lump-sum distributions, alternate payees, and cash
or deferred arrangements.
The plan administrator must provide you with this written
explanation no earlier than 90 days and no later than 30 days before
the distribution is made.
However, you can choose to have a distribution made less than 30
days after the explanation is provided as long as both of
the following requirements are met.
- You are given at least 30 days after the notice is provided
to consider whether you want to elect a direct rollover.
- You are given information that clearly states that you have
this 30-day period to make the decision.
Contact the plan administrator if you have any questions
regarding this information.
If an eligible rollover distribution is paid directly to you, the
payer must withhold 20% of it. This applies even if you plan to roll
over the distribution to a traditional IRA. You can avoid withholding
by choosing the direct rollover option, discussed later.
The payer does not have to withhold from an eligible rollover
distribution paid to you if either of the following
- The distribution and all previous eligible rollover
distributions you received during your tax year from the same plan
(or, at the payer's option, from all your employer's plans) total less
- The distribution consists solely of employer securities,
plus cash of $200 or less in lieu of fractional shares.
Other withholding rules.
The 20% withholding requirement does not apply to distributions
that are not eligible rollover distributions. However, other
withholding rules apply to these distributions. The rules that apply
depend on whether the distribution is a periodic distribution or a
nonperiodic distribution that is not an eligible rollover
distribution. For either of these distributions, you can still choose
not to have tax withheld. For more information, get Publication 575.
Direct rollover option.
Your employer's qualified plan must give you the option to have any
part of an eligible rollover distribution paid directly to a
traditional IRA. The plan is not required to give you this option if
your eligible rollover distributions are expected to total less than
$200 for the year.
If you choose the direct rollover option, no tax is withheld from
any part of the designated distribution that is directly paid to the
trustee of the traditional IRA.
If any part is paid to you, the payer must withhold 20% of that
part's taxable amount.
Choosing the right option.
The following comparison chart may help you decide which
distribution option to choose. Carefully compare the effects of each
||Payment to You|
||Payer must withhold income tax of
20% on the taxable part.|
|No 10% additional tax.
||If you are under age 59 1/2, a 10%
additional tax may apply to the taxable
part (including an amount equal to the
tax withheld) that is not rolled over.|
|Not income until later
distributed to you from
||Any taxable part (including an amount
equal to the tax withheld) not rolled over
If you decide to roll over any part of a distribution, the direct
rollover option will generally be to your advantage. This is because
you will not have 20% withholding or be subject to the 10% additional
tax under that option.
If you have a lump-sum distribution and do not plan to roll over
any part of it, the distribution may be eligible for special tax
treatment that could lower your tax for the distribution year. In that
case, you may want to see Publication 575
and Form 4972, Tax on
Lump-Sum Distributions, and its instructions to determine
whether your distribution qualifies for special tax treatment and, if
so, to figure your tax under the special methods.
You can then compare any advantages from using Form 4972 to figure
your tax on the lump-sum distribution with any advantages from rolling
over all or part of the distribution. If you roll over any part of the
lump-sum distribution, however, you cannot use the Form 4972 special
tax treatment for any part of the distribution.
The most you can roll over is the taxable part of any eligible
rollover distribution (defined earlier). The distribution you receive
generally will be all taxable unless you have made nondeductible
employee contributions to the plan.
Contributions you made to your employer's plan.
You cannot roll over a distribution of contributions you made to
your employer's plan, except voluntary deductible employee
contributions (DECs, defined below). If you roll over your
contributions (other than DECs), you must treat them as regular (not
rollover) contributions and you may have to pay an excess
contributions tax (discussed later) on all or part of them.
These are voluntary deductible employee contributions. Prior to
January 1, 1987, employees could make and deduct these contributions
to certain qualified employers' plans and government plans. These are
not the same as an employee's elective contributions to a 401(k) plan,
which are not deductible by the employee.
If you receive a distribution from your employer's qualified plan
of any part of the balance of your DECs and the earnings from them,
you can roll over any part of the distribution.
No waiting period between rollovers.
You can make more than one rollover of employer plan distributions
within a year. The once-a-year limit on IRA-to-IRA rollovers does not
apply to these distributions.
IRA as a holding account (conduit IRA) for rollovers to other
An IRA qualifies as a conduit IRA if it is a traditional IRA that
serves as a holding account or conduit for assets you receive in an
eligible rollover distribution from your first employer's plan. The
conduit IRA must be made up of only those assets and gains and
earnings on those assets. A conduit IRA will no longer qualify if you
mix regular contributions or funds from other sources with the
rollover distribution from your employer's plan.
If you receive an eligible rollover distribution from your
employer's plan and roll over part or all of it into one or more
conduit IRAs, you can later roll over those assets into a new
Property and cash received in a distribution.
If you receive property and cash in an eligible rollover
distribution, you can roll over either the property or the cash, or
any combination of the two that you choose.
Treatment if the same property is not rolled over.
Your contribution to a traditional IRA of cash representing the
fair market value of property received in a distribution from a
qualified retirement plan does not qualify as a rollover if you keep
the property. You must either roll over the property or sell it and
roll over the proceeds, as explained next.
Sale of property received in a distribution from a qualified
Instead of rolling over a distribution of property other than cash,
you can sell all or part of the property and roll over the amount you
receive into a traditional IRA. You cannot substitute your own funds
for property you receive from your employer's retirement plan.
You receive a total distribution from your employer's plan
consisting of $10,000 cash and $15,000 worth of property. You decided
to keep the property. You can roll over to a traditional IRA the
$10,000 cash received, but you cannot roll over an additional $15,000
representing the value of the property you choose not to sell.
Treatment of gain or loss.
If you sell the distributed property and roll over all the proceeds
into a traditional IRA, no gain or loss is recognized. The sale
proceeds (including any increase in value) are treated as part of the
distribution and are not included in your gross income.
On September 2, Mike received a lump-sum distribution from his
employer's retirement plan of $50,000 in cash and $50,000 in stock.
The stock was not stock of his employer. On September 24, he sold the
stock for $60,000. On October 4, he rolled over $110,000 in cash
($50,000 from the original distribution and $60,000 from the sale of
stock). Mike does not include the $10,000 gain from the sale of stock
as part of his income because he rolled over the entire amount into a
Special rules may apply to distributions of employer securities.
For more information, get Publication 575.
Some sales proceeds rolled over.
If you roll over part of the amount received from the sale of
property, see Publication 575.
Life insurance contract.
You cannot roll over a life insurance contract from a qualified
plan into a traditional IRA.
Distributions received by a surviving spouse.
If a distribution from an employer's qualified plan or a
tax-sheltered annuity is paid to the surviving spouse of a deceased
employee, that spouse can roll over into a traditional IRA part or all
of any eligible rollover distribution (defined earlier). The surviving
spouse can also roll over all or any part of a distribution of
deductible employee contributions (DECs).
Distributions under divorce or similar proceedings (alternate
If you are the spouse or former spouse of an employee and you
receive a distribution from a qualified employer plan as a result of
divorce or similar proceedings, you may be able to roll over all or
part of it into a traditional IRA. To qualify, the distribution must
- One that would have been an eligible rollover distribution
(defined earlier) if it had been made to the employee, and
- Made under a qualified domestic relations order.
Qualified domestic relations order.
A domestic relations order is a judgment, decree, or order
(including approval of a property settlement agreement) that is issued
under the domestic relations law of a state. A "qualified domestic
relations order" gives to an alternate payee (a spouse, former
spouse, child, or dependent of a participant in a retirement plan) the
right to receive all or part of the benefits that would be payable to
a participant under the plan. The order requires certain specific
information, and it cannot alter the amount or form of the benefits of
Tax treatment if all of an eligible distribution is not
Any part of an eligible rollover distribution that you keep is
taxable in the year you receive it. If you do not roll over any of it,
special rules for lump-sum distributions may apply. See Publication 575.
The 10% additional tax on early distributions, discussed later
under What Acts Result in Penalties?, does not apply.
Keogh plans and rollovers.
If you are self-employed, you are generally treated as an employee
for rollover purposes. Consequently, if you receive an eligible
rollover distribution from a Keogh plan (a qualified plan), you can
roll over all or part of the distribution (including a lump-sum
distribution) into a traditional IRA. For information on lump-sum
distributions, see Publication 575.
For more information about Keogh plans, get Publication 560.
Distribution from a tax-sheltered annuity.
If you receive an eligible rollover distribution from a
tax-sheltered annuity plan, you can roll it over into a traditional
Receipt of property other than money.
If you receive property other than money, you can sell the property
and roll over the proceeds as discussed earlier.
If your traditional IRA contains only assets (including earnings
and gains) that were rolled over from a tax-sheltered annuity, you can
roll over these assets into another tax-sheltered annuity. If you plan
another rollover into another tax-sheltered annuity, do not combine
the assets in your IRA from the rollover with assets from another
source. Do not roll over an amount from a tax-sheltered
annuity into a qualified pension plan.
For more information about tax-sheltered annuities, get Publication 571.
Rollover from bond purchase plan.
If you redeem retirement bonds that were distributed to you under a
qualified bond purchase plan, you can roll over tax free part of the
amount you receive from the redemption into a traditional IRA.
Reporting rollovers from employer plans.
To report a rollover from an employer retirement plan to a
traditional IRA, use lines 16a and 16b, Form 1040, or lines 12a and
12b, Form 1040A. Do not use lines 15a or 15b, Form 1040, or lines 11a
or 11b, Form 1040A.
Transfers Incident To Divorce
If an interest in a traditional IRA is transferred from your spouse
or former spouse to you by a divorce or separate maintenance decree or
a written document related to such a decree, the interest in the IRA,
starting from the date of the transfer, is treated as your IRA.
The transfer is tax free. For information about transfer of
interests in employer plans, see Distributions under divorce or
similar proceedings (alternate payees) under Rollovers,
If you are required to transfer some or all of the assets in a
traditional IRA to your spouse or former spouse, there are two
commonly used methods that you can use to make the transfer. The
- Changing the name on the IRA, and
- Making a direct transfer of IRA assets.
Changing the name on the IRA.
If all the assets in a traditional IRA are to be transferred, you
can make the transfer by changing the name on the IRA from your name
to the name of your spouse or former spouse.
Under this method, you direct the trustee of the traditional IRA to
transfer the affected assets directly to the trustee of a new or
existing traditional IRA set up in the name of your spouse or former
spouse. If your spouse or former spouse is allowed to keep his or her
portion of the IRA assets in your existing IRA, you can direct the
trustee to transfer the assets you are permitted to keep directly to a
new or existing traditional IRA set up in your name. The name on the
IRA containing your spouse's or former spouse's portion of the assets
would then be changed to show his or her ownership.
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