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If you have multiple Individual Retirement Accounts (IRAs) then you need to be aware of a fairly new IRS ruling that could end up costing you significant penalties if you misstep and start transferring assets from one IRA account to another.
In the past you could move or transfer assets within a 60-day period without fear of any penalties as long as you rolled over the assets within the allotted period.
When it is done correctly there is no tax consequence to moving money from one IRA to another via a 60-day rollover. The rule is that within 60 days of receiving a distribution from an IRA, the proceeds including any taxes withheld must be reinvested into another IRA account.
The new ruling states that you only get one 60-day rollover per 365-day period, this is especially important when an individual own multiple IRAs. The 365-day period begins with the day the individual receives the first distribution that is rolled over.
Keep in mind that an individual may make unlimited rollovers from employer plans to a IRA as long as the withdrawal is direct trustee to trustee.
When it comes to Roth IRA there is no limit on the number of Roth conversions that one can make.
The rules can be quite complex so I would advise that you review your options with a tax specialist before making any changes that could end up costing you a fortune.
Daniel Iuculano, AAMS CMFC
Accredited Asset Management Specialist
Chartered Mutual Fund Counselor
