IRS Forgives Rollover Mistake

A man’s family noticed that he was mentally declining in 2016. It may have been the onset of dementia.  In 2017, this man withdrew funds from his IRA, apparently intending to roll the money into a new IRA.  However, due to his medical condition, the man never completed the rollover.

This man’s grandson son was later appointed as the man’s guardian and discovered that, not only was the rollover not completed, but that his grandfather had never filed a tax return for 2017! The grandson promptly filed the return and reported the distribution.  Then he asked the IRS for a waiver of the 60-day rule that applies to IRA rollovers, to allow the rollover to be completed after his grandfather’s death.

In a Private Letter Ruling, the IRS granted the waiver, as it was determined that events beyond the reasonable control of the taxpayer caused the problem.  The IRS is not always so forgiving of taxpayer errors, but the facts in this unusual case were compelling enough for them to do so.

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