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One IRA Rollover Per Year Per IRA Account

Many IRA owners do not realize that they can only do one IRA-to-IRA or Roth-to-Roth rollover, per IRA or Roth IRA account, per year.

If you have more than one IRA or Roth account, you can do one rollover from each account. So you could do five rollovers when you have five IRAs. If you do a rollover on April 20th, you cannot do another rollover from that account until the next April 20th.

The funds you roll over can go back into the account they came out of or into any other account you may have or into a new account you establish. Once an account receives a rollover, it too cannot do a rollover distribution for one year. However, it can receive more than one rollover during a year.

Once a rollover is done from an IRA or Roth account, any subsequent distributions cannot be rolled over to any other IRA or Roth account (Roth conversions are an exception to this rule). If a rollover is done, you have an excess contribution in the receiving IRA or Roth account.

Excess contributions can be corrected without a penalty if they are properly removed (following the procedures for withdrawing excess contributions) by October 15th of the year after the contribution is made. When they are not timely corrected, a penalty of 6% per year applies for every year the excess contribution amount remains in the account. The penalty is reported on Form 5329 which is treated as a standalone return. When the form is not filed, the statute of limitations does not start to run. So this penalty goes on forever, even to your beneficiaries. And, other penalties and interest can be assessed by IRS.

If you think you have violated the one-rollover-per-year-per-account rule, please talk to a specialist in this area as soon as possible to limit the taxes and penalties you will have to pay.

It is always better to do a direct transfer of funds from one IRA or Roth account to another account. You can do as many transfers as you want in a year. There is no possibility of having an excess contribution.

-By Beverly DeVeny and Jared Trexler

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Thursday's Slott Report Mailbag

Consumers: Send in Your Questions to [email protected]

Can I transfer money from my IRA to my husband's Roth IRA? I am 35, and he is 36.

Thank you!

Gail Clements

No. The only way your IRA funds can be transferred to your husband’s IRA is in a divorce or after your death. Even then, it would have to be transferred to a similar IRA, for example an IRA to IRA or a Roth IRA to another Roth IRA. In this case, you cannot transfer your IRA into your husband’s Roth IRA.