Solutions 4 Financial Independence: 06/05/18

Published: Jun. 5, 2018 at 2:23 AM EDT
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Question: I recently transferred my IRA account twice within the same year to two different companies. Then I read an article that you can only do one roll over a year, does this mean I am in trouble?

Answer (John Halterman-Beacon Wealth Management): “You know what, tax laws are very complex. In fairness, no one wants to mess them up because unfortunately when you mess up tax laws a lot of times you get penalized.

Let me explain what you’re dealing with. You are talking about an IRA transfer versus an IRA rollover. The transfer rule says this: you can transfer your IRA account from one IRA to another IRA, that’s called a transfer. In all actuality you are able to do unlimited transfers on a yearly basis.

A rollover, which basically sounds alike, is where you take it from an employer-sponsored plan such as a 401(k) and roll it over to an IRA. Even if you rolled it over to an IRA, then transferred it to another IRA, in all actuality you are OK. What you can’t do is you can’t do two rollovers in a year. But what you can do is unlimited amounts of transfers.”

Question: That is a little confusing, so to clarify is he OK?

Answer (John Halterman-Beacon Wealth Management): “It is absolutely confusing because they seem so alike. From a conception standpoint they are alike, but from a technical standpoint because of where the source came from they are completely different in the eyes of the IRS. Wording is very critical in avoiding penalties.

Floyd you are a lucky man, misunderstanding is not a big deal because I just clarified it for you and you will not have any penalties in this situation.”