Best Practices

60-Day Rollover: What You Need to Know

by Ana-Maria Sanders   Date Published: Jan 06, 2022

It may come as a shock that you are eligible to have multiple IRA accounts. If you choose to combine these accounts, you’ll likely be required to initiate a rollover. The IRA has special regulations in place pertaining to rollovers, particularly the 60-day rollover rule. It is important to understand the requirements and limitations of this rule to avoid overpaying in taxes. To ensure a smooth transition, we’ve compiled a comprehensive guide on the 60-day rollover rule.

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Direct Rollover vs. 60-day Rollover

There are two ways to roll over your retirement funds: direct and indirect. Direct rollovers, also called trustee-to-trustee transfers, are conducted on your behalf. For example, the company that currently holds your funds will directly transfer your retirement savings to the new company. Typically, this process is completed electronically after you submit the necessary paperwork.

Conversely, during an indirect rollover, you act as an intermediary. The funds in your current account will be dispersed to you in the form of a check. You then have 60 days to deposit those funds in the new IRA account. Taxes are waived if the funds are transferred from one eligible account to another within the allotted time frame. However, taxes and other penalties may be imposed if a portion of the funds are taken out or the transfer is not completed in 60 days.

60-day Rollover Rules

Smiling couple in front of laptop.

The 60-day rollover rule applies specifically to indirect IRA transfers. The main stipulation to be aware of when conducting an indirect rollover is the 60-day window. After receiving your check, you will have 60 days to deposit it in the new IRA account. If you cannot complete the transfer due to unforeseen circumstances, you may still be able to skip the taxes and fees.

Usually, you can obtain a waiver for missing the deadline:

  • By automatically qualifying.
  • By requesting a private letter ruling.
  • By self-identifying that you met the deadline. If the IRA conducts an audit, they may determine that you qualify.

In addition to the 60-day rollover rule, the IRS only allows one transfer per year. This applies to indirect IRA to IRA rollovers. However, there are exceptions to this rule. For example, you won’t be confined by the yearly limits if you initiate a trustee-to-trustee transfer or a direct transfer. Additionally, you won’t be subject to the once-per-year rule if you convert your traditional IRA to a Roth IRA

Moreover, it is essential to know how to report a 60-day rollover on your taxes. You will be required to file a 1099-R with your yearly taxes. The original financial institution will issue this tax form to you. Additionally, the IRA custodian will complete Form 5498 to confirm the transferred amount with the IRS.

Qualifying Transfers

Depending on the type of account you have, the 60-day rollover rules may or may not apply. You are limited to the 60-day window and once-a-year rule if you have the following accounts:

Conversely, the rules don’t apply if you:

  • Transfer from a retirement plan to an IRA account. For example, this includes 401(k), 401(a), and 403(b) accounts.
  • Transfer from an IRA account to a retirement plan.
  • Initiate a Roth conversion.

Limitations and Penalties

Retiree calculating taxes.A 60-day indirect rollover is time-sensitive with specific rules and limitations. Before initiating a transfer, it is best to be well versed in these regulations to avoid penalties. If you violate the 60-day and once-yearly rules, the transferred amount will be considered a taxable distribution. This means that the funds will be subject to income tax rates.

Additionally, if you miss the violation and the funds remain in the account, you can be subject to more penalties. The transferred amount can be considered an excess contribution and will incur a 6% tax. This tax will be required every year that the amount remains in the IRA account.


Ultimately, the IRS has strict rules in place to ensure that IRA rollovers are subject to proper taxes and that loopholes aren’t created to skirt these requirements. Although most eligible IRA accounts will be subject to the 60-day and once-per-year rules, there is an alternative to avoid these. Instead of opting for an indirect rollover, you can choose to transfer your funds directly. A trustee-to-trustee rollover does not impose the same time limits or regulations. As such, you won’t be subject to income tax or early withdrawal penalties with a direct rollover.

Sum Up

Transferring funds between IRA accounts is a common practice, but less common might be information regarding the rules that accompany rollovers. If you roll over funds from one IRA to another eligible IRA, you will be subject to a 60-day rule. When you initiate an indirect transfer, you will be required to deposit the issued funds into the new account within 60 days. It is important to keep these regulations in mind to ensure a smooth transaction that will help you avoid unnecessary fees.

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Ana-Maria Sanders, author at OpenLoans
Financial Analyst
Ana-Maria Sanders writes about consumer and business finance. She has been featured on,, FOX News, and FOX 29.
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