How to Fund a Self Directed IRA (Transfer/Rollover Rules)

Oct 22, 2018

The rules for IRA rollovers changed (effective date) January 1, 2015. Please be sure you are following a guide dated January 1, 2015 or later.

Understanding the difference between an IRA to IRA transfer (recommended method) and an IRA to IRA Rollover

IRA to IRA Transfer: (recommended method)

Funds flow from your account at the former IRA trustee to your account at the new IRA trustee without touching you (the IRA owner):

Q. How often can an IRA be “transferred”?

A. Unlimited

Q. Taxes and Penalties?

A. An IRA to IRA Transfer is not a taxable event. There are no income tax penalties.

IRA to IRA Rollover:

Funds flow from the former IRA Trustee to the owner of the IRA. The owner of the IRA deposits the funds in their personal checking account and writes a new check to the new IRA trustee.

Q. How often can IRA funds be rolled-over?

A. IRA rollovers can be done only once in a 12-month period. Running 12 months not calendar year.

Q. Is each IRA account counted separately?

A. No, the 12-month restriction applies to the individual. If you have several accounts, you are permitted only one rollover per 12 months (not one rollover per account).

Q. What happens if I make a second rollover in 12 months?

A. The second rollover will be treated as an IRA distribution and will be a taxable event.

Suggestion: To retain the greatest flexibility consider moving your funds by an IRA transfer (i.e. let us do it for you).

Reference: Internal Revenue Code Section 408(d)(3)(B)