If you are planning to roll all or part of your IRA into a different IRA this year, you’ll only get one chance. Previously, you could roll over each of your IRAs once every 12 months. Now you are limited to a total of one rollover per 12-month period, regardless of how many IRAs you own. Spouses are considered separate individuals for this purpose, so a rollover by one will not limit the other.
The IRS will ignore 2014 rollovers in determining the 2015 limit, as long as the IRA rolled over in 2015 is not one of those that was rolled over in the previous 12 months. As an example, say you have three IRAs. You rolled two of them over in June 2014. In 2015, you can roll the third IRA over, but not the other two.
What happens if you go over the limit? If you make a second rollover within the 12-month window, you’ll be taxed on the entire amount withdrawn plus an additional 10% if the early withdrawal penalty applies. You’ll also pay a 6% penalty on any amount over the $5,500 contribution limit ($6,500 if you are over 50) that you put into the destination IRA. The 6% penalty will be reapplied for each year the money remains in the account.
The change affects both traditional and Roth IRAs, which are lumped together in determining the limitation. The only exceptions are (a) conversions from traditional IRAs to Roth IRAs, and (b) rollovers into IRAs from 401(k) accounts.
You can still make unlimited transfers among your IRAs by instructing your plan trustee to switch the funds directly. Trustee-to-trustee IRA transfers are not considered rollovers and the limitations don’t apply.
Rollover mistakes can create significant tax liabilities. Please consult your tax professional before you transfer money between your IRAs.