Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

into the account after the 60-day deadline by way of the self-certification procedure. So the IRS will have a quick way to find you and review your entitlement to the hardship waiver. Of the 11 reasons, #1 is the most common reason people are forced to seek waivers of the 60-day deadline—financial institution error. Since 2001, more waivers have been issued (under the private letter ruling procedure—see ¶ 2.7.07 ) for that reason than for all the others combined. Reason #11 appears to be just another example of reason #1—financial institution error. There have also been many waivers issued where the rollover delay was due to the taxpayer’s illness, or illness or death of his family members (#5, #6). There have been a few waivers for postal error (#9), lost checks (#2), and cases where the taxpayer thought he had rolled the money into a retirement plan but it wasn’t actually a retirement plan (#3). Rare (nonexistent?) are waivers due to damage to the principal residence (#4), the taxpayer’s being incarcerated (#7), restrictions imposed by a foreign country (#9), or a returned IRS levy (#10).  Error by a financial advisor who is not part of the distributing or receiving financial institution.  The taxpayer’s death.  Mental or emotional state of the taxpayer.  Funds were stolen from the account; taxpayer was unaware of the theft for some period of time (unless fraud and theft count as “financial institution error”). This does not mean that waivers cannot be granted for those causes. It just means you must use the apply-for-a-private-letter-ruling approach ( ¶ 2.7.07 ) rather than self-certification. Unfortunately, as ¶ 2.7.07 will show, the IRS’s has not developed clear standards that taxpayers can look to for guidance in determining whether they qualify for a self-certified hardship waiver. Unless you have an open and shut case of financial institution error (backed up by the institution’s written admission), you may have a hard time figuring out whether your facts would or would not qualify for a hardship waiver based on past IRS rulings. A participant or surviving spouse who does not qualify for self-certification ( ¶ 2.7.06 ) can request a hardship waiver of the rollover deadline from the IRS by following the procedure for obtaining a private letter ruling, as outlined in Rev. Proc. 2003-16, 2003-1 CB 359. Obtaining an IRS letter ruling requires payment of a “user fee” (filing fee). Prior to 2016, requests for waiver of the 60-day deadline had their own special reduced user fee schedule, but effective in 2016 and later, the user fee is the same as for any other PLR—$10,000 as of 2017 (possibly less for low-income taxpayers). Since the issuance of Rev. Proc. 2003-16, the IRS has issued hundreds of private letter rulings dealing with these deadline waiver requests. Here is a recap of some of the most common Hardship waiver method #2: Apply to the IRS Also, note that the list in Rev. Proc. 2016-47 leaves out some of the “hardships” that have regularly led to waiver requests in the past: