Waiver of 60 day rolloverfor IRAs

joetaxpayer · Joined: 25 Aug 2007 Posts: 280

I've been made aware of a situation, friend of a friend kind of thing, I
am not in direct contact with the individual.
A woman in her 60s died, and left her brother a sum of money in an
annuity, held within a trust. The annuity was a rollover from the
deceased's 401(k).
The brother, who is disabled, and has not filed any tax return for
decades, panicked, and withdrew the money about 4 months ago. He's now
aware that this money is taxed as ordinary income and his tax bill will
be near $40K. Had he left it in the annuity, he should have been able to
withdraw $9000 or so each year and pay no tax at all.

The question - does anyone here have experience requesting a waiver of
the 60 day rollover rule? He should have been able to roll the money to
a beneficiary IRA, but was completely ignorant of any tax laws, and did
not know this. Is the IRS ever merciful in such circumstances?

JOE

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Archived from group: misc>taxes>moderated

Mark Bole · Joined: 25 Aug 2007 Posts: 327

joetaxpayer wrote:
> I've been made aware of a situation, friend of a friend kind of thing, I
> am not in direct contact with the individual.
> A woman in her 60s died, and left her brother a sum of money in an
> annuity, held within a trust. The annuity was a rollover from the
> deceased's 401(k).
> The brother, who is disabled, and has not filed any tax return for
> decades, panicked, and withdrew the money about 4 months ago. He's now
> aware that this money is taxed as ordinary income and his tax bill will
> be near $40K. Had he left it in the annuity, he should have been able to
> withdraw $9000 or so each year and pay no tax at all.
>
> The question - does anyone here have experience requesting a waiver of
> the 60 day rollover rule? He should have been able to roll the money to
> a beneficiary IRA, but was completely ignorant of any tax laws, and did
> not know this. Is the IRS ever merciful in such circumstances?

I would start with the trustee(s), this seems like an issue for such as
them.

-Mark Bole

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rick++ · Joined: 25 Aug 2007 Posts: 328

On Feb 24, 4:40 pm, joetaxpayer wrote:
> The brother, who is disabled, and has not filed any tax return for
> decades, panicked, and withdrew the money about 4 months ago.

You also have to watch out that evidence of high income may terminate
certain income such as SSI and medicaid. It will be attributed to his
SS#.

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