As with most IRA rules, there are exceptions to the once-per-year rollover rule. The rule applies to IRA-to-IRA and Roth-to-Roth 60-day rollovers. Just to be clear, an IRA rollover occurs when a check is issued from the IRA or Roth custodian, and the check is payable to the account owner. Here are a few of the once-per-year rollover rule exceptions.
Check Payable to the New Custodian
Issuing a check directly to the new custodian rather than the IRA or Roth IRA account owner is a transfer, not a rollover. The 60-day limit on depositing the check into your new account doesn’t apply.
A Roth conversion is treated as a rollover for tax purposes. Even if money is electronically moved from your IRA account directly to a Roth account, it’s considered a rollover. This type of IRA-to Roth IRA transaction isn’t subject to the once-per-year rollover rule.
You are able to do a Roth IRA conversion as a 60-day rollover. However, it still isn’t subject to the once-per-year rule.
Moving Employer Plan Funds into an IRA or Roth
All distributions from employer plans are rollovers under the tax code. A direct rollover goes directly to the IRA while an indirect rollover is the same as a 60-day rollover. They don’t count under the once-per-year rule. Because your funds go from an employer directly into an IRA or Roth IRA, they are not an IRA-to-IRA or Roth-to Roth transaction and the once-per-year rule doesn’t apply.
Moving an IRA to an Employer Plan
Despite being the exact opposite of the previous exception, the result is still the same. Because you aren’t making an IRA-to-IRA or Roth-to-Roth transaction, the once-per-year rule doesn’t apply.
There are other less-common transactions that are also exceptions to the once-per-year rule. They include:
Qualified Reservist Repayments
Used when a reservist repays a distribution taken while on active duty.
Rollovers of Service Members Group Life Insurance (SGLI) Payments to a Roth IRA
Used when a beneficiary of SGLI payments rolls a death benefit to a Roth IRA.
Rollovers of First-Time Homebuyer Distributions
Used when a first-time home purchase is not completed and funds withdrawn from an IRA or Roth are redeposited.
Thought it was easy, didn’t you?