By Ian Berger, JD
IRA Analyst
One of the mantras we have here at Ed Slott & Company is: “Don’t do 60-day rollovers. Do direct transfers instead.” The reason? 60-day rollovers between IRAs are subject to several rules that have serious tax consequences if not followed.
One of those restrictions is the so-called “once-per-year” rollover rule. That rule prevents you from doing a 60-day rollover of more than one IRA distribution you receive during any 12-month (365-day) period. If you violate this rule, the second IRA distribution is not eligible for rollover. So, it could become taxable and subject to the 10% early distribution penalty. And, depositing that second withdrawal into another IRA is an excess contribution subject to an annual 6% penalty unless timely corrected. To make matters worse, unlike missing the 60-day deadline, a mistake with the one-rollover-per-year rule cannot be corrected by you or waived by the IRS. That’s why we call it a “fatal error.”
The once-per-year rule applies to traditional IRA-to-traditional IRA rollovers and Roth IRA-to-Roth IRA rollovers. It doesn’t apply to company plan-to-IRA rollovers, IRA-to-company plan rollovers, or traditional IRA-to-Roth IRA rollovers (Roth conversions).
The easiest way to explain the rule is to say you can’t do more than one 60-day rollover in any 12-month period. But that’s not really completely accurate. The rule actually kicks in if you receive more than one IRA distribution in a 12-month period – not if you do more than one 60-day rollover within 12 months.
Here are a few examples that illustrate the difference:
Example 1: Jolene received a traditional IRA distribution on September 1, 2025, that she rolled over to another traditional IRA on October 1, 2025. Let’s say Jolene receives a second distribution on August 15, 2026 (within 12 months of her first distribution). She would still violate the once-per-year rule even if she delays rolling over the second distribution until October 2, 2026 (more than 12 months after the first rollover on October 1, 2025).
Example 2: Now assume Jolene receives the second distribution on September 10, 2026 (more than 12 months after the first distribution on September 1, 2025). She would not violate the once-per-year rule even if she rolls over the second distribution on September 25, 2026 (within 12 months of the first rollover on October 1, 2025).
Once again, you can avoid all of this complexity and potential tax problems by doing direct transfers instead of 60-day rollovers when you want to move your IRA funds. You can do as many direct transfers as you like during a 12-month period without any concern about the once-per-year rule.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.