The once-per-year IRA rollover rule sounds pretty easy to understand. You may only do one IRA-to-IRA (or Roth IRA-to-Roth IRA rollover) per year (365 days). However, this rule is often misunderstood. One common confusion about the once-per-year rollover rule is whether multiple distributions or multiple deposits will trip you up.

Multiple Distributions on Different Days and One Rollover Deposit

If you can take a distribution on one day and roll it over on multiple different days and this is acceptable under the once-per-year rollover rule, is the opposite scenario also allowed? Can you take multiple distributions on different days and deposit them at one time as one rollover? The answer would be no. Even if all the distributions were taken from the same IRA, this would still not be allowed.

Example: Jimmy takes a $2,000 distribution from his IRA on December 1 and another $30,000 distribution on December 12. His plan is to roll over both on the same day to a new IRA. Unfortunately for Jimmy, only one of his IRA distributions is eligible for rollover. This is because the once-per-year rule limits him to rolling over only one distribution within a 365-day period.

One Distribution and Multiple Rollover Deposits

If you take one distribution from your IRA, you may split the funds and roll them over to multiple IRAs. The rollovers could be done on different days and that would not be a problem. This works for purposes of the once-per-year rollover rule because only one distribution is received even though there is more than one rollover deposit.

Example: Annie received a $90,000 distribution from her IRA on November 15. On November 20, Annie rolled over $75,000 to her IRA. On November 25, she decided to roll over the remaining $15,000 to another IRA. This is not a violation of the once-per-year rollover rule because Annie received only one distribution even though she did two rollovers on two different dates.

Do Direct Transfers

The cost of misunderstanding the once-per-year rollover rule can be high. Distributions that are not eligible for rollover will most likely be fully taxable. An attempt to roll over these distributions will result in an excess contribution with possible penalties.

The best advice is to avoid 60-day rollovers and the complications of the once-per-year rollover rule. You can do this by moving your IRA funds as trustee-to-trustee transfers instead. With a transfer, the funds go directly from one IRA custodian to another. Transfers are not subject to the once-per-year rule so you can move your IRA funds this way as many times as you like during the same year.


By Sarah Brenner, JD
Director of Retirement Education

Copyright © 2023, Ed Slott and Company, LLC Reprinted from The Slott Report, 2022, with permission. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article. Content posted in Ed Slott’s IRA Corner was developed and produced by Ed Slott & Co. to provide information on a topic that may be of interest. Ed Slott and Ed Slott & Co. are not affiliated with Ethos Capital Management, Inc. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.  The tax information provided is general in nature and should not be construed as legal or tax advice. Information is derived from sources deemed to be reliable. Always consult an attorney or tax professional regarding your specific legal, or tax situation. Tax rules and regulations are subject to change at any time. Ethos Capital Management, Inc. is a registered investment adviser. The firm only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.