How Often Can IRAs Be Moved Between Institutions?
Individual retirement accounts offer people a wide variety of investment options for their retirement saving. As a result, people often want to move their money from one institution to another, seeking better returns, lower returns or even more stable investments. Knowing how to move the money, and how to report it on your taxes, can help make sure you avoid penalties from the Internal Revenue Service.
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Rollovers
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IRA rollovers refer to the process of moving money from on IRA to another, including IRAs at different institutions, by having the money paid to you and then you depositing the money into another IRA. However, you only have 60 days to complete this process, otherwise the IRS will determine that you have permanently withdrawn the money. You are limited to one rollover of the money per 12-month period. For example, if you moved $5,000 from IRA A to IRA B, you would not be able to take out money for a rollover from IRA A or IRA B for 12 months, but if you had other IRAs, you could perform rollovers originating from those accounts.
Tax Reporting of Rollovers
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You must report your rollovers on your taxes, even if they do not result in tax liability. If you move the money from one tax-deferred IRA to another tax-deferred IRA, or a Roth IRA to another Roth IRA, your liability will be zero. You must enter the amount of the rollover as a non-taxable IRA distribution, enter "0" as the taxable portion and write "rollover" next to it to indicate that you performed a rollover. If you roll over the money from a tax-deferred IRA to a Roth IRA, you will have to include the amount of the rollover as taxable income, but you will get to take tax-free qualified withdrawals.
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Transfers
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Trustee-to-trustee transfers of IRA funds refer to when the money is moved from one account to another, including IRAs at different institutions, by your financial institutions. You must sign off on similar paperwork as the rollover, but you never touch the money in a transfer, unlike a rollover. The IRS does not limit the number of trustee to trustee transfers that you can make during the year.
Tax Reporting of Transfers
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When you perform a trustee-to-trustee transfer, you do not have to report the moving of IRA money on your income taxes as long as you are moving the money between IRAs that are either both tax-deferred, such as a transfer from a traditional IRA to another traditional IRA, or between IRAs that are after-tax, such as Roth IRAs. If you perform a transfer from a tax-deferred IRA to a Roth IRA, you must report the transfer on your taxes because the amount of the transfer counts as taxable income.
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References
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