Questions and Answers

An IRA owner is allowed to roll over just one distribution from the same IRA, or the same assets, in a 12-month period. According to the instructions for filing Form 5498, an IRA custodian/trustee should report (or correct any reporting already completed) any ineligible rollover contribution as a regular contribution. This required reporting serves to make the second (or third, etc.) distribution from a single IRA in a 12-month period, taxable.

Any portion of a regular contribution (including an ineligible rollover) that exceeds the individual’s contribution limit for the year is an excess contribution, which may be subject to a 6 percent penalty tax. Removing an excess contribution, plus net income attributable (NIA) by the IRA owner’s tax-filing due date, plus extensions, avoids the 6 percent penalty tax. IRA owners should seek professional tax advice when dealing with multiple rollovers and excess contributions.