Multiple Rollovers

Should an IRA rollover from a qualified plan be made to a rollover IRA as a holding account (conduit IRA) for IRA rollovers to other eligible retirement plans?

Generally, separate rollover IRA s are no longer needed.

Prior to 2002,

regular IRA rollover contributions to a traditional IRA could not be rolled over into a qualified retirement plan. Rollover distributions from qualified plans had to be segregated from regular contributions to preserve the ability to roll them back into another qualified retirement plan.

Starting in 2002,

Regular IRA contributions (except nondeductible IRA contributions) as well as IRA rollover contributions can be rolled into qualified retirement plans.

Exception -

Participants born before 1936: Participants born before 1936 may be able to use capital gains and averaging treatment on certain lump sum distributions from qualified retirement plans.

The opportunity to use this treatment is lost if the lump sum IRA rollover distribution is commingled with regular IRA rollover contributions. Such treatment can be retained if the IRA rollover distribution is made to a rollover IRA and later rolled back into another qualified plan.

How are IRA rollovers from qualified retirement plans to IRA s reported?

Report any IRA rollover from a qualified retirement plan to a traditional IRA on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A.

Enter the total amount of the IRA rollover distribution on line 16a of Form 1040 or on line 12a of Form 1040A. If the total amount on line 16a of Form 1040 or line 12a of Form 1040A was rolled over, enter zero on line 16b of Form 1040 or line 12b of Form 1040A, indicating that none of the IRA rollover distribution is taxable.

Otherwise, enter the taxable portion of the part that was not rolled over on line 16b of Form 1040 or line 12b of Form 1040A. Also, put " Rollover " next to line 16b on Form 1040 or line 12b of Form 1040A.

Note: If an IRA rollover distribution is taken in November or December and not rolled over until the next year (but still within the 60-day rollover period) a statement should be attached to the tax return explaining what was done.

Example: Mrs. Jay took a $50,000 IRA rollover distribution from her employer's profit sharing plan and within 60 days rolled over $36,000 into her traditional IRA, keeping $14,000. Her employer sent Mrs. Jay a Form 1099-R reporting a $50,000 IRA rollover distribution. Mrs. Jay reports the rollover on her Form 1040.