Moving retirement funds can be a valuable part of a long-term tax and retirement strategy: but the method you use matters. A transfer completed directly between financial institutions is treated differently from a distribution paid to you personally. Timing, withholding, account type, and the nature of the distribution can all affect whether the transaction remains tax-deferred.

Recent IRS materials reviewed in August 2026 provide clarification and proposed administrative improvements. They do not announce a blanket new August 2026 rule that changes the basic rollover requirements. The familiar rules under the Internal Revenue Code remain central, including IRC §§402(c)(3), 408(d)(3)(A), and 408(d)(3)(B).

Michael Garcia, Enrolled Agent (EA), and the team at ProTaxMasters help individuals, freelancers, and small-business owners evaluate retirement-account transactions, prepare accurate returns, and address IRS questions or notices when issues arise.

The three main ways to move retirement funds

Although the terms “transfer” and “rollover” are often used interchangeably, they describe different transactions.

1. Direct trustee-to-trustee IRA transfer

A direct trustee-to-trustee transfer generally occurs when one IRA custodian sends funds directly to another IRA custodian. You do not receive the money personally.

For example, you may instruct the financial institution holding your traditional IRA to transfer funds directly to a new traditional IRA at another institution. The receiving institution may also be able to accept a check made payable to the new IRA for your benefit, even if the check is delivered to you for deposit.

Generally, a direct IRA transfer:

• Is not treated as a distribution paid to you
• Does not require federal income tax withholding
• Does not trigger the 60-day rollover deadline
• Is not subject to the one-IRA-to-IRA-rollover-per-12-month rule

The one-rollover-per-12-month limitation is found in IRC §408(d)(3)(B). Because a trustee-to-trustee transfer is not an IRA rollover for this purpose, it generally does not consume your annual rollover opportunity.

2. Direct rollover from an employer plan

A direct rollover occurs when an eligible distribution from an employer-sponsored plan: such as a 401(k), 403(b), or eligible governmental 457(b) plan: is paid directly to another eligible retirement plan or IRA.

The check may be made payable to the receiving trustee or custodian rather than to you personally. The transaction can also be completed electronically when the plan and receiving institution support that method.

A direct rollover generally:

• Avoids the 60-day deadline because you do not receive the funds
• Avoids mandatory 20% federal withholding on an eligible employer-plan distribution
• Is not subject to the IRA one-rollover-per-12-month rule
• May allow continued tax deferral when the receiving account is properly eligible

The receiving plan or IRA must be able to accept the rollover. Not every employer plan is required to accept every type of rollover, so confirm acceptance before requesting the distribution.

3. Indirect or 60-day rollover

An indirect rollover occurs when the retirement plan or IRA pays the funds to you, and you then deposit all or part of the distribution into another eligible retirement plan or IRA.

The general rule is that the rollover must be completed within 60 days after you receive the distribution. The deadline is strict, and the distribution may become taxable if the funds are not properly deposited on time.

Indirect rollovers also create additional risks:

• Employer-plan distributions paid to you generally require 20% federal withholding
• IRA distributions paid to you generally default to 10% federal withholding unless you elect otherwise
• You may need to use other funds to replace withholding if you want to roll over the full amount
• An indirect IRA-to-IRA rollover may be subject to the one-rollover-per-12-month limit

Why the 20% withholding rule matters

Suppose an employer plan distributes $50,000 directly to you. If the payment is an eligible rollover distribution, the plan generally must withhold 20%, or $10,000, for federal income taxes. You would receive $40,000.

If you deposit only the $40,000 into a new IRA, the $10,000 withheld is generally treated as distributed to you. That amount may be taxable, and if you are under age 59½, an additional tax may apply unless an exception is available.

To roll over the entire $50,000, you would generally need to contribute the full $50,000 to the receiving account: including $10,000 from another source to replace the withholding. The amount withheld is reported as taxes paid and may be applied against your eventual tax liability, but it does not automatically preserve the tax-deferred status of the entire distribution.

A direct rollover can generally avoid this problem because the payment is made directly to the receiving plan or IRA.

The one-IRA-to-IRA-rollover-per-12-month rule

Under IRC §408(d)(3)(B), you generally may complete only one indirect rollover from an IRA to another IRA during any 12-month period. The rule applies across your IRAs, including traditional, Roth, SEP, and SIMPLE IRAs in the circumstances covered by the rule.

The limitation generally does not apply to:

• Direct trustee-to-trustee transfers between IRAs
• Rollovers from an employer plan to an IRA
• Rollovers from an IRA to an employer plan
• Rollovers from one employer plan to another employer plan
• Traditional IRA-to-Roth IRA conversions

This is one reason direct transfers and direct rollovers are often preferable when they are available.

What if the 60-day deadline was missed?

The IRS recognizes limited circumstances in which late-rollover relief may be available. Relief is not automatic in every situation, and it does not erase other rollover violations.

Automatic waiver

An automatic waiver may apply in limited financial-institution-error situations. Generally, the financial institution must have received the funds before the end of the 60-day period, you must have followed its procedures, the failure must have resulted solely from the institution’s error, and the funds must be deposited within the required corrective period.

This relief is narrow. A taxpayer should preserve account statements, correspondence, deposit instructions, and proof of when the financial institution received the funds.

Self-certification

Under Revenue Procedure 2020-46 and related IRS procedures, a taxpayer may be able to provide a written self-certification to the receiving IRA trustee or plan administrator. The certification states that the taxpayer missed the deadline for a reason identified in the applicable procedure.

A financial institution may rely on the self-certification when accepting and reporting the contribution. However, self-certification is not an IRS determination. The IRS may later examine the facts and conclude that the taxpayer did not qualify for a waiver.

Self-certification also does not cure other problems, such as an improper account type, an ineligible distribution, failure to replace withholding, or violation of the one-rollover-per-12-month rule.

Private letter ruling

If automatic waiver and self-certification are unavailable, a taxpayer may request a private letter ruling from the IRS. This process involves specific procedures, documentation, and a substantial user fee. A favorable ruling is not guaranteed and the associated cost for this request is substantial for most people.

The IRS can waive the 60-day requirement in appropriate circumstances, but it generally cannot waive other statutory rollover requirements.

Distributions that generally cannot be rolled over

Not every retirement-plan distribution is eligible for rollover treatment. Excluded distributions may include:

• Required minimum distributions
• Certain hardship distributions
• Certain corrective distributions of excess contributions or deferrals
• Loans treated as distributions
• Certain substantially equal periodic payments
• Certain insurance-related distributions
• Some distributions involving employer securities or prohibited transactions

Required minimum distributions deserve special attention. An RMD generally must be taken as required and cannot simply be rolled into another IRA or retirement plan to avoid taxation.

Inherited IRA transactions, Roth conversions, after-tax contributions, plan-loan offsets, and beneficiary distributions can involve additional rules. These transactions should be reviewed based on the account owner, beneficiary status, account type, and distribution year.

What the 2026 IRS materials clarify

IRS Notice 2026-13 updates safe-harbor explanations that employer plans may provide to recipients of eligible rollover distributions. The notice reflects existing statutory and regulatory rules, including direct rollovers, 60-day rollovers, and mandatory withholding.

IRS Notice 2026-49 provides proposed sample forms and procedures intended to simplify and standardize rollovers involving employer plans and IRAs. The proposed process emphasizes secure electronic communication, coordination between the distributing and receiving plans, and reduced participant confusion.

Notice 2026-49 does not create a blanket new rollover rule, and its sample forms are optional. It also does not apply to IRA-to-IRA transfers or IRA-to-IRA rollovers in the way it applies to transactions involving an employer plan.

For the most current information, review:

• IRS guidance on rollovers of retirement-plan and IRA distributions
• IRS Topic No. 413, Rollovers from Retirement Plans
• Publication 590-A, Contributions to Individual Retirement Arrangements
• Publication 590-B, Distributions from Individual Retirement Arrangements
• Form 1099-R and Form 5498 instructions
• IRC §408

How ProTaxMasters can help

For individuals, a rollover review can help identify withholding risks, deadlines, reporting requirements, and potential tax consequences before funds move.

For business owners, retirement-plan decisions can affect personal tax planning, employee benefits, business cash flow, and future wealth preservation. ProTaxMasters can help coordinate tax preparation and year-round planning while assisting with IRS notices, examinations, and other account issues.

If you received an IRS notice related to a retirement distribution: or you are unsure whether a rollover was completed correctly: do not ignore it. A timely review may help identify available options before the issue becomes more difficult to resolve.

Michael Garcia, Enrolled Agent (EA), has served taxpayers since 2018 and is also a Texas Notary Public. Through ProTaxMasters, he provides professional tax preparation, tax consulting, and IRS representation support for individuals and businesses.

A consultation does not obligate you to move forward. It simply gives you an opportunity to understand the facts, deadlines, and available paths before making a retirement-fund decision.

As a separate 2026 planning note, bonus depreciation for the 2026 tax year is 100% and is not subject to a phase-out schedule, as provided by the One Big Beautiful Bill Act, Public Law 119-21.

Official Legal Disclaimer:

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing