IRA-One Rollover Per Year Rule: Breaking It Down For You!

IRAs or Individual Retirement Accounts are a common vehicle for retirement savings, with tax-free growth or on a tax-deferred basis. There are 3 types of IRAs: Traditional, Roth and Rollover. Each of these have their own rules & regulations for contributions, eligibility, contribution limits, tax savings etc. 

So an IRA is essentially a basket in which you keep your stocks, bonds, mutual funds or other assets. IRAs are retirement accounts you can open on your own and unlike 401(k)s provided by employers, have lower contribution limits. 

What Is A Rollover?:  
A "Rollover" happens when funds from a retirement account such as a 401(k) into an IRA or from one IRA to another. A rollover is generally a non-taxable event, if you deposit a payment from one retirement account into another within 60 days. 

By rolling over a payment from an IRA, you’re not only saving for your future, your money continues to grow tax-deferred.

If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions.

One Rollover Per Year Rule:
Beginning in 2015, you can only make one rollover from an IRA to another (or the same) IRA in a 12 month period. This is regardless of the number of IRAs you own. 

The IRS came out with clarifications to this rule via Announcement 2014-15 and Announcement 2014-32

According to these announcements; the limit will apply by aggregating all of an Individual's IRAs, including SEP and SIMPLE IRAs, traditional and Roth IRAs. This is effectively treating all your IRAs as one. 

Exceptions To The One Rollover Per Year Rule:

  • Direct transfers of IRA funds from one trustee to another are not affected. Revenue Ruling 78-406 does not consider this direct transfer a "Rollover". 
  • Rollovers from Traditional IRA to Roth IRA are considered "Conversions" and are not affected by the above rule either. 
  • This rule also ignores some 2014 distributions. This is called a "Transition" rule and it applies only to 2014 distributions and only if different IRAs are involved. 

Tax Consequences of the One Rollover Per Year Limit:
Unless the exceptions above apply, the tax consequences of this new rule will be:
  • You must include amounts of distribution from an IRA in your gross income, if you had made a IRA-IRA rollover in the preceding 12 months. 
  • You may be subject to the 10% early withdrawal tax on amounts included in gross income. 

  • If you put these distributed amounts into another or the same IRA, the amount maybe treated as an excess contribution and taxed at 6% per year as long as they remain in the IRA. 
Please consult with an Enrolled Agent regarding these complicated rules if you think they may apply to you. 

Bibliography: § 408(d)(3); Publication 590-A; Bobrow v. Commissioner, T.C. Memo 2014-21; Announcements 2014-15 & 2014-32. 

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,



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