Rules For Moving IRA Accounts

The rules for moving IRA accounts allow for the transfer of funds from one IRA to another, or the rollover from one IRA to another. If you fail to follow the correct procedure for transferring these funds, you could incur unnecessary fees and penalties in the process.

Learn How To Move Your IRA

There are additional restrictions placed on what types of individual retirement accounts can be rolled over into other types of accounts. While these rules may seem complicated, a retirement specialist at ETrade can help you figure out if you are eligible for moving your IRA account.

There are also different rules concerning reporting the move on your taxes depending on which method of moving IRA accounts you choose to utilize. This will depend on whether you transfer or rollover your account.

Rules For Moving IRA: Transfers Vs Rollovers

When you rollover your IRA you are withdrawing funds from one individual retirement account and re-depositing them into another IRA. A transfer is when the funds are transferred automatically from one account to another by the brokerages.

You do not need to report a transfer on your taxes, but you must use form 1099R to report a rollover. With a transfer, the funds are never in your hands, whereas you do retain possession of the funds when you rollover your account.

As it is possible to use the funds from a rollover as a short-term loan, there are strict time considerations that must be adhered to in order to avoid fees and penalties. It is extremely important to familiarize yourself with the rules regarding IRA rollovers before utilizing this option.

Rules For Moving IRA: Accepted Rollovers

You must be careful to rollover an existing IRA into an approved type of IRA, or you may be subject to taxes and penalties. According to the rules for moving IRA accounts, SEP-IRAs and traditional IRAs can be rolled over into a Roth IRA, while Roth IRAs must be rolled over into other Roth IRAs.

After they have been open for two years, Simple IRAs, SEP-IRAs, and traditional IRAs can be rolled over into any type of IRA. You can not make new contributions to your rollover IRA, or you risk tainting the funds and lose the ability to roll over the funds in the future. A separate IRA should be opened for the purpose of making new contributions.

Rules For Moving IRA Accounts: Time Limits

When you rollover one IRA to another, you have a maximum of sixty days or the IRS will tax and penalize the money as though it had been withdrawn. You are also allowed one rollover for every 12-month time period. If you try and rollover your IRA twice in a 12-month time frame you will be charged income tax on the withdrawal, as well as early withdrawal penalties.

Since Roth IRAs are funded with post-tax dollars, they not subject to income tax, only early withdrawal penalties.

The rules for moving IRA accounts allow for exceptions to the 60 day rule under exceptional circumstances. The main exception is usually sue to a failure on the part of the financial institution to deposit the funds within the lime limit.

Online brokerages such as ETrade make it easy to rollover your IRA accounts. You can access all of the information you need, as well as customized service for your individual investment needs.

You may also like:

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  2. Can You Use IRA Accounts As Collateral?
  3. IRS Roth Conversion Rules
  4. Roth IRA Early Withdrawal Rules
  5. Are Offshore IRA Accounts Right For You?
  6. Withdrawing From IRA Accounts At 60 Years Old
  7. Withdrawing From IRA Accounts At 60 Years Old
  8. Rules And Regulations Regarding IRA Hardship Withdrawal

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