Some favorable news from the IRS this week…

The revenue service unveiled a new procedure Wednesday to help people who accidentally miss the 60-day time limit for rolling over their retirement plan distributions into another qualified retirement plan or IRA.

Eligible taxpayers can now qualify for a waiver of the 60-day time limit and avoid possible taxes and penalties on early distributions, if they meet certain requirements. The IRS also provided a sample of a letter that taxpayers can use to prove to the retirement plans receiving the rollover that they qualify for the waiver.

Traditionally, an eligible distribution from an IRA or workplace retirement plan can only qualify for a tax-free rollover if it’s contributed to another IRA or workplace plan by the 60th day after it’s received. Until the announcement of this new procedure, taxpayers who don’t meet that 60-day time limit could only obtain a waiver by asking for a private letter ruling from the IRS.

A taxpayer who misses the two-month time limit will now be able to more easily qualify for a waiver if one or more of the 11 circumstances listed in the revenue procedure apply to them. Those mitigating circumstances can include cases when a distribution check was misplaced and never cashed; the taxpayer’s home was severely damaged; or the taxpayer or family member becomes severely ill or dies.

Even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination.

While this new procedure may come as a relief to some, it’s still highly recommended that eligible taxpayers who wish to transfer their retirement plan or IRA distributions consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process.