A 60-day rollover is a way to move money between retirement accounts without owing tax on the distribution: your plan or IRA pays the money to you, and you have 60 days from the day you receive it to deposit the funds into another eligible retirement account. Hit the deadline and the deposited amount stays tax-deferred. Miss it and the distribution becomes ordinary income, plus a 10% early withdrawal penalty if you are under 59½.
This is sometimes called an indirect rollover, because the money passes through your hands instead of moving trustee-to-trustee between institutions. That detour is the whole point when you need short-term access to the cash, and it is also the source of every complication below.
How the 60 Days Work
The clock starts the day you receive the distribution, not the day you request it and not the day the check is dated. You have 60 calendar days to get the money into a receiving retirement account. Any accepted deposit method works: mailing a check, depositing in person, or wiring funds, whatever the receiving institution takes. Ask for written confirmation of the deposit amount and settlement date, because that record is what proves the rollover was timely if the IRS ever asks.
You do not have to roll over the whole distribution. If you deposit only part of it, the deposited portion is treated as a tax-free rollover and the rest is taxable income for the year you received it.1Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans The taxable portion may also carry the 10% early withdrawal penalty if you are under 59½.
For most straightforward account moves, a direct trustee-to-trustee transfer is simpler: no withholding, no deadline pressure, no once-per-year limit. The 60-day route earns its place when you actually need to use the money for something before redepositing it.
The One-Per-Year Limit on IRA Rollovers
You can only do one indirect IRA-to-IRA rollover in any 12-month period, and this cap applies across every IRA you own. Traditional, Roth, SEP, and SIMPLE IRAs are all treated as a single IRA for this rule, so one indirect rollover from any of them blocks indirect rollovers from all the others for a full year.2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The 12 months run from the date you received the distribution.
Several common moves are exempt from this limit:2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
- Rollovers from a 401(k), 403(b), or other employer plan into an IRA
- Rollovers from an IRA into an employer plan
- Rollovers between employer plans
- Direct trustee-to-trustee transfers between IRAs
- Roth conversions from a traditional IRA to a Roth IRA
If you violate the once-per-year rule, the second rollover is treated as a taxable distribution, with the 10% penalty possible on top if you are under 59½.3Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
Withholding Changes the Math
The distributing institution takes tax out before you ever see the money, and how much it takes depends on the account type.
From a 401(k) or Other Employer Plan
Employer-sponsored plans must withhold 20% for federal income tax on any distribution eligible for rollover, and you cannot waive that withholding.4Office of the Law Revision Counsel. 26 USC 3405 Special Rules for Pensions, Annuities, and Certain Other Deferred Income Request a $50,000 distribution and you receive $40,000; the other $10,000 goes to the IRS.
To keep the full amount tax-deferred, you have to deposit the entire $50,000 into the new account within 60 days, which means finding $10,000 elsewhere to replace what was withheld. Deposit only the $40,000 you received and the withheld $10,000 becomes a taxable distribution, subject to income tax and potentially the 10% early withdrawal penalty.2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions The withheld amount comes back to you as a tax credit when you file, but you need to front it in the meantime.
From an IRA
IRA distributions have a default withholding rate of 10%, and you can elect out of withholding entirely.2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions That is why IRA-to-IRA indirect rollovers are cleaner than 401(k) rollovers: you can receive the full amount and redeposit it without scrambling to replace withheld dollars.
Distributions That Cannot Be Rolled Over
Some payments simply are not eligible for rollover, and depositing one into a retirement account creates an excess contribution that carries a 6% excise tax for each year it stays there. The ineligible categories include:2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
- Required minimum distributions once you reach RMD age
- Hardship distributions from an employer plan5eCFR. 26 CFR 1.402(c)-2 Eligible Rollover Distributions
- Corrective distributions of excess contributions1Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
- Substantially equal periodic payments over your life expectancy
- Defaulted plan loans reclassified as distributions
Roth Conversions
Moving money from a traditional IRA or other pre-tax account into a Roth IRA through a 60-day rollover is a taxable conversion. The converted amount is included in your gross income for the year at your ordinary rate, because you are shifting funds from pre-tax to after-tax status.6Office of the Law Revision Counsel. 26 USC 408A Roth IRAs No 10% early withdrawal penalty applies as long as the funds land in the Roth IRA within 60 days. Roth-to-Roth rollovers are not taxable, since that money was already taxed. You cannot roll Roth IRA funds into a traditional IRA.
Inherited Accounts
A surviving spouse who is the sole beneficiary can use a 60-day rollover to move inherited funds into their own IRA, and from that point the account is treated as if it had always been theirs.7Internal Revenue Service. Retirement Topics – Beneficiary
Non-spouse beneficiaries cannot. If you inherited a retirement account as a child, sibling, or other non-spouse heir, your only option for moving the money is a direct trustee-to-trustee transfer into an inherited IRA titled in the deceased owner’s name for your benefit. Take a distribution yourself and try to redeposit it within 60 days, and the entire amount is taxable.
SIMPLE IRAs in the First Two Years
During the first two years of participating in an employer’s SIMPLE IRA plan, you can only roll SIMPLE IRA funds into another SIMPLE IRA. Roll into any other type of retirement account inside that window and the transfer is treated as a taxable withdrawal, with the early withdrawal penalty jumping from 10% to 25%.8Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules After the two-year mark, standard rollover rules apply.
If You Miss the 60-Day Deadline
A single day late and the whole distribution is taxable income, plus the 10% penalty if you are under 59½.2Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions Two routes may still save the rollover.
Self-Certification
If the delay was caused by circumstances on a defined IRS list, you can self-certify for a waiver using the model letter in Revenue Procedure 2020-46 and give it to the receiving institution.9Internal Revenue Service. Accepting Late Rollover Contributions The listed reasons include a financial institution error, a misplaced distribution check, a deposit into an account you mistakenly thought was eligible, severe damage to your principal residence, the death or serious illness of you or a family member, incarceration, foreign country restrictions, a postal error, and an IRS levy whose proceeds were later returned.10Internal Revenue Service. Waiver of 60-Day Rollover Requirement (Revenue Procedure 2016-47) You must complete the rollover as soon as the reason no longer applies; a deposit within 30 days after the obstacle is removed meets that standard. Self-certification is off the table if the IRS has already denied a waiver for the same distribution.
Private Letter Ruling or Disaster Relief
If your situation does not match the self-certification list, you can ask the IRS for a formal waiver through a private letter ruling. The agency weighs factors like institutional errors, hospitalization, disability, and other events outside your control.11Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement There is a user fee and processing time, so this path usually only makes sense for larger balances. Taxpayers in federally declared disaster areas may get an automatic extension announced in an IRS news release after each declaration.12Internal Revenue Service. Disaster Relief for Retirement Plans and IRAs
Reporting the Rollover on Your Tax Return
A completed 60-day rollover generates two forms. The sending institution issues Form 1099-R showing the gross distribution and a code identifying the type of payment.13Internal Revenue Service. Instructions for Forms 1099-R and 5498 The receiving institution issues Form 5498 reporting the rollover contribution, often after the filing deadline, so do not wait on it to file.
On Form 1040, IRA distributions go on Line 4a with the taxable amount on Line 4b (zero if fully rolled over) and the rollover box checked on Line 4c. Distributions from employer plans use Lines 5a, 5b, and 5c the same way. If only part of the distribution was rolled over, the remainder goes on the taxable-amount line. Get this right: if the IRS sees a 1099-R and no matching rollover treatment on your return, it will treat the whole distribution as unreported income and bill you for tax, penalties, and interest.