This is the end of the year.  Since many of my senior clients have to take out the Required Minimum Distribution (RMD) from all their IRA accounts, they also start to think about moving the rest of their IRA money into possibly a more productive investment.  But a word of caution, beginning this year, there are new IRS rules for IRA Rollovers.  You can only make one rollover of one IRA to another (or to the same IRA) in any 12‑month period, no matter how many IRAs you own.  The limit includes all types of IRAs, including SEP IRAs, SIMPLE IRAs, Roth IRAs and Traditional IRAs.

If you violate the new rules you may be subject to reporting the rollover as income and a 10% early withdrawal penalty.  If the distributed amount stays in the new (or same) IRA, you may also be subject to a 6% tax each year.

But take heart, the Internal Revenue Service gives you an exemption.  You don’t have to report the income from an IRA distribution if you deposit the amount into an eligible retirement plan (such as another IRA) within 60 days.  But, this is a once a year deal.  A second rollover within a 12‑month period would violate the new rules.

Luckily, there is a way around this allowing you to do multiple transfers without violating the rule.  First, let’s take a look at how you would violate the rule and then let’s see how to avoid the violation.

As an example, let’s say you want to take $50,000 from your IRA brokerage account and another $50,000 from your SEP IRA and put them into an IRA money market account in your local bank.

The incorrect way to do this is to have the brokerage make out a distribution check made payable to you.  Less than 60 days later you open the IRA money market account and deposit the check at your local bank.  Then you receive a distribution check from your SEP IRA for your IRA made payable to you.  Again, within 60 days you deposit the check into the IRA money market at the bank.  Even though each distribution was deposited into an IRA within 60 days, having more than one distribution check payable to you violates the new rules.

Fortunately, there is a very easy method to avoid the one time limit in a 12‑month period.  If the rollover is from one trustee to another trustee (“Trustee‑to‑Trustee Transfer”) the rollover is exempt from the new rules.  There are no limitations on the Trustee‑to‑Trustee Transfers.  So the check you receive from your brokerage account for your IRA needs to be made payable to your local bank (for the benefit of (FBO) you).  As before, less than 60 days later you deposit the check into the IRA money market at your local bank.  Again, you receive a distribution check from your SEP IRA also made payable to your local bank FBO you.  As long as you also deposit the check into the money market IRA at your local bank within 60 days, you’re good.  Because each distribution was deposited into an IRA within 60 days and the rollovers were Trustee‑to‑Trustee Transfers, each rollover was exempt from the new rules.

So remember, when rolling over your IRA, direct your trustee to make the check payable to the other trustee.  Completing a Trustee‑to‑Trustee Transfer provides you flexibility to make additional rollovers during a 12‑month period.