Understanding The One Rollover Per Year Rule

This particular rule is one that can really cause you a lot of problems – and there’s no reason to run into problems with it, if you plan ahead and do things right.

One of the big reasons why this rule can cause so much heartache is because there is no way, procedurally, for the IRS to grant an exception, no matter what the circumstances are.  For example, in the 60-day-rollover rule, often the IRS may be in a position to grant an exception, especially if something awful happened to make you miss the deadline.  This sort of exception is not even a consideration for the One-Rollover-Per-Year rule. It just can’t be done.

Key Features of the One-Rollover-Per-Year Rule

You are allowed to roll over funds from one IRA or Qualified Retirement Plan to another, that’s a given… but you’re limited in how often you can do this, if you use the 60-day-rollover.  A 60-day or indirect rollover is when you take distribution from an IRA in the form of a check (or a deposit into a non-IRA account), and then within 60 days you deposit the funds into another IRA (or back into the same IRA).

The other way to rollover funds between IRAs, the preferred method, is called a trustee-to-trustee or direct transfer, where you don’t actually receive a check – the transfer is done between the first IRA and the second IRA, with no one else handling the money in between.  There is no limit to how many trustee-to-trustee rollovers you can do per year.

FYI, the IRS doesn’t even refer to these direct transfers as rollovers, generally speaking – they call them trustee-to-trustee transfers.  The “R” word is generally reserved for the indirect, 60-day type.

So – if you use an indirect rollover to move funds from one IRA to another, you now have limited yourself, with regard to those two IRAs.  You cannot rollover money from either IRA to any other IRA for 12 months – actually 365 days, 366 in leap years.

How about an example to ‘splain this a little better?


Situation 1: You have 3 IRAs: IRA A, IRA B, and IRA C.  There is $100,000 in each account. You wish to move half of the money from IRA A into IRA B.  If you take a withdrawal from IRA A of $50,000 and receive a check for it, you can then deposit the check into IRA B within 60 days, and the rollover is complete.

At this point, you cannot rollover any the remaining $50,000 in IRA A into IRA B or IRA C for 12 months.  You furthermore cannot rollover any of the current $150,000 that is now in IRA B into IRA A or IRA C for 12 months.  What you could do is rollover any amount you wish from IRA C into either IRA A or IRA B –  as long as IRA C hasn’t been involved in an indirect rollover within 12 months.

Situation 2: Same situation as above, except that you do a direct, trustee-to-trustee rollover of $50,000 from IRA A to IRA B.  You are not limited at this point for making any other move with the funds in any of your IRAs.  You could rollover the same $50,000 back into IRA A from IRA B if you wanted using either method, but the indirect rollover would put you back into the limit mode described above.  You are free to make any rollovers you wish at this stage, since you used the trustee-to-trustee transfer.

Situation 3: Same facts as in Situation 1 above, except that you change your mind about the rollover a week after you requested the check from IRA A, and you deposit it back into IRA A (without ever depositing into IRA B).  Regardless of the fact that you’re back where you started, this action is considered a rollover.  This has now limited your ability to successfully rollover any amount from IRA A for a period of 12 months.  The other IRAs are unaffected.

Situation 4: This one will be more complex, showing what might happen if you aren’t paying attention.  Same starting facts as the others. You do an indirect rollover of $50,000 from IRA A to IRA B on September 1, 2010.  So far so good.  But then, you decide you want to rollover the remaining $50,000 from IRA A into IRA C, and you do this on December 1, 2010.  Then in January of 2011, you figure out that what you’d really like is to rollover all of the funds from IRA C into IRA A instead, so you take the distribution of $150,000 from IRA C and deposit into your IRA A account within 60 days.

What is going to happen?  Well, if all of those things happened and none of the custodians stopped you, you would have to pay tax on a distribution of $50,000 (plus any growth on that amount) from IRA A in 2010.

Since the rollover of $50,000 from IRA A to IRA C was within the 12 month period, this would be considered a disallowed rollover and therefore a taxable distribution.  Since you pulled the money out before taxes were due, there is no additional consequence for your 2010 actions.  If you had waited until after April 18, 2011 you might have had to pay an additional 6% excess contribution tax on the $50,000 disallowed rollover, since this would be considered a regular contribution to IRA C.

But part of the rollover from IRA C to IRA A, the amount less than the disallowed excess contribution and any associated growth, would be allowed as a completed rollover.  Remember the prohibition is on rollovers from the involved accounts, and since IRA C had not been involved in a valid rollover within 12 months (since the rollover from IRA A had been disallowed), this amount is a valid rollover.  You’d still have to pull out the $50,000 (plus growth) from IRA A to avoid excess contribution tax.

In all of the situations above where the distribution became taxable, there could also be the 10% early distribution penalty applied unless one of the exceptions is met.


So – what’s the lesson here?  Never, ever, ever do a 60-day rollover unless there is some mitigating circumstance that requires it.  And if you have to do the indirect 60-day rollover, make sure that you mind your p’s and q’s with the accounts involved, so that you don’t get hung up on the one-rollover-per-year rule.  Often, the IRA custodian will step in and explain the prohibition to you, but not always, and they’re not responsible for your actions.  If you do this and they let you get away with it, the entire tax bill is yours and yours alone.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • Gary,

    Direct transfers are not limited, from any tax-deferred source to any tax-deferred destination. No trustee-to-trustee transfer will trigger a one-rollover-per year rule. You can make as many trustee-to-trustee transfers into and out of any IRA account as you like, as often as you like, with no limit.

    Hope this helps –


  • Jim,

    I guess what I’m not clear about after reading IRS Pub 590 are 401k transfers from employers to a IRA any different than IRA to IRA transfers when using trustee to trustee transfers when it comes to the one per year rule. In other words three “direct” 401k transfers in the same IRA is not a violation of one per year rule if they are direct trustee to trustee.

  • Gary,

    As mentioned in the article above, there is no limit on trustee-to-trustee transfers in a year (or any time period). So if you’re moving money from various accounts into one IRA via trustee-to-trustee transfers, there should be no issue with this.


  • Jim,

    Does a direct rollover (trustee to trustee) into an IRA count the same as a indect rollover which starts the one year rule. In December 2011 I moved a 401k into this IRA but would like to move two more into the same IRA. I did receive a 1099r with a G in box 7. All moves will be trustee to trustee no checks made out to me. Can I use the original IRA for all three 401k’s in one year.

  • Dan –

    The rule is one indirect rollover per year, per account, both distributing and receiving.

    So in other words, if you had two IRAs and you distributed them both, then deposited each of the distributions into two new IRAs, you should have no problem. If you distributed one of the IRAs and deposited it into a new IRA, and then later distributed another IRA you could not deposit the second distribution into the new IRA within 12 months of the first deposit.

    Hope this helps –


  • Jim,

    I had 2 IRA variable annuities that had come due last week and cashed them both out to prevent any market loss during a transfer. I opened 2 accounts for different guarantee purposes yesterday, and I wrote 2 checks, 1 to each company, of the entire amount distributed, to both new companies. I have heard “one indirect rollover per year, per person” and I have heard “one indirect rollover per yer, per account.” Which is true? I won’t be moving this money again period, as they were payment guarantee accounts for my retirement, am I ok with the IRS?

  • John,

    There are no age limits on rollovers, to the best of my knowledge, so you can do what you wish – adhering to the one-rollover-per-year rule, of course.

    On your February 2012 withdrawal, if you complete the rollover within 60 days you will not owe tax on the distribution. Otherwise, you would ultimately owe tax on that transaction when you file your return in April of 2013.


  • Hi Jim,
    1. I’ve been over 70 and 1/2 for several years and recently read that I should not have been rolling over traditional IRAs either directly or indirectly. Is this correct?
    2. In an attempted rollover from a bank IRA in Feb. 2012 I have received the check in my name but not rolled it over yet. There were no taxes withheld – how soon do I owe taxes on this?

  • Hi Jim,

    I lost my job last year and did a direct rollover from my employers pension plan into a local bank ira. The check was made out directly to the bank and was deposited into a new ira. I then had to borrow funds from that ira, but was able to replace the funds within 60 days (rollover) into same ira. Was that ok ? If I am understanding this right, I only did one rollover because the original funds came from employer pension plan and was also direct. I never cashed the check. The bank wasn’t sure if it counted as 2 rollovers within one year because when I opened the IRA, they coded it as a rollover from my employer. Thanks Tarrie

  • Thanks for you prompt reply. My tax prep agent says the same as you. Read somewhere that because the 401k direct rollover is actually a cash dispersion, it invokes the 1 year rule. However my tax agent said its all about the funds moving into my possession. In this case, the funds moved directly into the ira from trustee to trustee. This is also evidenced by my 1099-r, with code G in the correct box. Thanks again for your attention.


  • Rick,

    You can do as many direct rollovers (where you don’t touch the money) as you like, but only one indirect rollover (where the money goes into your possession outside of the qualified accounts) per 12 months. Once you’ve done an indirect, either into or out of an account, you can’t do any direct rollovers into or out of those accounts for 12 months either.

    Sounds like from your description that you are okay.


  • In 2010 I did a 401k transfer to an Ira. It was a direct rollover, never touched funds. I then did an Ira to Ira rollover from the above ira to another ira within the same year. Was this a violation?

    Thanks Rick

  • Leroy –

    If you simply take a distribution from the IRA, you will only owe tax and penalty (if under age 59 1/2) on this additional distribution. The other distribution was a qualified rollover, as you’ve described, so no penalty or tax is owed there.

    You will not be eligible to rollover the amount of this more recent distribution since it’s been less than a year from your last rollover.


  • Hi Jim,

    I took $10K out of my IRA in March 2011 and replaced it within the 60 day roll-over period. It’s been less than a year, but I really need to pull some money out, I know I will have the taxes and penalty on this next withdrawal. Will I also owe taxes and a 10% penalty on the $10K
    from earlier in the year?

    Thank you for a very helpful website!

  • Thanks Jim,

    the IRS pub wasn’t too clear on multiple “into” transactions. They were clear on multiple “from” and the fact that once you put money “into” an account you cannot take any out for 12 months.

    I will get the 3 checks from the 3 banks and put all 3 into the borkerage acct. and then not do anything with any of the accounts for at least 12 months.

    I must say that in all of my searching the Internet your explanation was the most clear and precise. Some of the advice from attorney sites was outright wrong.

    So thank you again for having this great site.

    best to you in the new year…wally

  • Wally, if you do your rollovers directly to the brokerage by a trustee-to-trustee transfer, you will have no limits on your accounts.

    Otherwise, if you receive a check as a distribution from each of the IRA CDs and simply deposit the check with the brokerage as a rollover, then you’ll be limited as you described.


  • Thanks for the great explanations.

    I have 4 IRA CDs maturing at 3 different banks and I want to indirectly roll over all 3 into my IRA at a brokerage firm.

    From you examples I think I can do this as long as I don’t try to roll over any money FROM the brokerage IRA for 12 months AND as long as I don’t rollover any more money FROM the banks for 12 months. I think this is similar to your example 1 except I have A, B, C and D with the brokerage being B

    So, bottom line: from A to B, from C to B and from D to B then no FROM transactions for A,B,C or D for 12 months.

  • what if i have 4 ira account
    can i take money from each account put it back within
    60 days in the same account that will make indirect rollover 4 times within 12 months is that ok ?

  • Unfortunately, Harsh, this is one rule that the IRS has no leeway to waive. As with all of these kinds of transactions, the institution has no responsibility to ensure you’re doing things correctly. It sounds as if your IRA is disqualified and tax is likely due for 2010 on the amount of your transfer(s).

    Hope everything works out okay for you…


  • Hello Jim:

    I took more than 3 or 4 times during 2010 “60-day or indirect rollover” distributions and deposited back in the same IRA account within the 60 Day window each time. I just found out about the “Once per 12 month rule” about such distribution. My question, is it possible to get a waiver from IRS from being considered as a taxable income due to my ignorance of the rule? The custodian institution did not stop me putting the money back with 60-days more than once in a 12 month.


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