New IRS Ruling on IRA Rollovers
The IRS has recently agreed with a tax court ruling, and beginning January 1, 2014, a taxpayer may make only one non-taxable rollover contribution within a calendar year (any 12-month time period). Prior to this ruling, and according to existing IRS guidelines as explained in Publication 590, people with multiple IRA accounts could make a 60-day tax-free rollover per IRA. The IRS has changed this to only allow one IRA rollover per year, regardless of how many IRA accounts you own.
IRA rollovers where you can move money from one IRA to another, tax deferred, can be interpreted as a short-term no interest loan. Since you cannot borrow from an IRA, the tax court has ruled that you can only make one IRA rollover per year. The IRS is changing the tax code to agree with the court’s ruling. Multiple rollovers are considered loans and the amount withdrawn is treated as taxable income.
If you are younger than 59 ½, you could also owe a 10% early-withdrawal penalty on the funds.
Even if you only rollover funds one time, if you do not deposit them within the 60 day time period, it is considered taxable income.
You will still be able to transfer funds from one IRA trustee directly to another since automatic direct transfers of IRA funds from one provider to another do not allow you access to the money and transfers are not rollovers (a transfer is a non-taxable event since you have never actually taken receipt of the funds; a rollover could involve taxes since you actually have taken receipt of the funds). Also, rolling over a distribution from a qualified retirement plan [a 401(k) plan for example] into an IRA does not count since the funds are not coming from an existing IRA.
You should always work with a qualified tax specialist who understands the 60 day rules, who understands the differences between a rollover and a transfer, and who understands how the tax law applies to your IRAs and other investments.