60-day IRA rollover waiver for a fraud-scam victim

Plain-English summary

When you take money out of a traditional IRA, you normally must put it back into a retirement account within 60 days or it counts as a taxable distribution. Here, a taxpayer withdrew money from her IRA after being manipulated by a scam: fraudsters posing as tech support, a bank anti-fraud employee, and a federal officer told her hackers had compromised her accounts and that she had to move her money to "secure" it, threatening her with arrest if she told anyone. By the time she learned it was a scam and reported it, the 60-day window had already closed. She asked the IRS to waive the deadline. The IRS agreed under section 408(d)(3)(I), which lets it excuse a late rollover when enforcing the deadline would be against equity or good conscience for reasons beyond the taxpayer's control. She now has 60 days from the date of the letter to redeposit up to the withdrawn amount, and it will be treated as a valid rollover.

Ruling snapshot

• Question: Should the IRS waive the 60-day rollover deadline for an IRA withdrawal the taxpayer could not roll over in time because she was defrauded?
• Outcome: Approved (waiver granted)
• Key authorities: IRC § 408(d)(3)(I); Rev. Proc. 2003-16

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
IRS Employee Plans
August 9, 2022

Uniform Issue List: 408.03-00

Number: 202244029
Release Date: 11/4/2022

Legend
Taxpayer A =

IRA B =

Company C
Agency D =
Agency E =
Country F =
Individual 1 =

Individual 2 =

Individual 3
Amount 1 =
Date 1 =

Date 2 =

Date 3

Date 4 =

Dear

This is in response to your request dated May 5, 2022, as supplemented by
correspondence dated July 26, 2022, submitted on your behalf by your authorized
representative, in which you request a waiver of the 60-day rollover requirement
contained in section 408(d)(3) of the Internal Revenue Code (the "Code").

You submitted, under penalties of perjury, the following facts and representations
in support of your ruling request.

Taxpayer A represents that on Date 2, she withdrew Amount 1 from IRA B, a
traditional IRA under section 408(a) of the Code. Taxpayer A asserts that she was
unable to accomplish a rollover of Amount 1 within the 60-day period prescribed
by section 408(d)(3) because she was the victim of a fraud scheme.

On Date 1, Taxpayer A was trying to access her bank account when she received
an alert on her computer to contact a representative from Company C. As
instructed, she contacted Individual 1, who falsely claimed to work for Company C.
Individual 1 told her that hackers from Country F had downloaded illegal material
onto her computer and taken money from her bank account. Individual 1 instructed
Taxpayer A to contact Individual 2. Falsely claiming to be an employee in the anti-
fraud department of her bank, Individual 2 told Taxpayer A that she would have to
secure her funds to protect them from the hackers and that the illegal material on
her computer was a federal crime. Individual 2 also put Taxpayer A in contact with
Individual 3. Individual 3 falsely claimed to be a federal officer with Agency D and
assured Taxpayer A that once they secured all her assets, he would give her a
check to reimburse her for withdrawals made from her accounts. Individuals 2 and
3 told Taxpayer A not to tell anyone and warned her that she would be arrested for
illegal material on her computer if she contacted law enforcement.

At Individual 2's direction, Taxpayer A withdrew money from her non-IRA
accounts. In addition, on Date 2, following the fraudsters' instructions, Taxpayer A
withdrew Amount 1 from IRA B. On Date 3, after the 60-day rollover period for the
distribution of Amount 1 from IRA B had expired, Individual 2 and Individual 3 told
Taxpayer A that she could tell her spouse about the withdrawals. Taxpayer A then
discovered that Individual 2's and Individual 3's phone numbers had been
reassigned or were no longer in service. On Date 4, Taxpayer A contacted the
local office of Agency E to report the fraud.

Based on the above facts and representations, Taxpayer A requests that the
Internal Revenue Service (the "Service") waive the 60-day rollover requirement

under section 408(d)(3) of the Code with respect to the distribution of Amount 1
from IRA B on Date 2.

Section 408(a) of the Code defines an individual retirement account to mean a
trust created or organized in the United States and requires that the trustee be a
bank or an approved non-bank trustee.

Section 408(d)(1) of the Code provides that, except as otherwise provided in
section 408(d), any amount paid or distributed out of an IRA shall be included in
gross income by the payee or distributee, as the case may be, in the manner
provided under section 72.

Section 408(d)(3) of the Code provides the rules applicable to IRA rollovers.

Section 408(d)(3)(A) of the Code provides that section 408(d)(1) does not apply to
any amount paid or distributed out of an IRA to the individual for whose benefit the
IRA is maintained if:

(i) the entire amount received (including money or any other property) is
paid into an IRA for the benefit of such individual not later than the 60th day after
the day on which the individual receives the payment or distribution; or

(ii) the entire amount received (including money and any other property) is
paid into an eligible retirement plan (other than an IRA) for the benefit of such
individual not later than the 60th day after the date on which the payment or
distribution is received, except that the maximum amount which may be paid into
such plan may not exceed the portion of the amount received which is includible in
gross income (determined without regard to section 408(d)(3)).

Section 408(d)(3)(B) of the Code provides that the rollover provisions of section
408(d)(3) do not apply to any amount received by an individual from an IRA if at
any time during the 1-year period ending on the day of such receipt such individual
received any other amount described in section 408(d)(3)(A)(i) from an IRA that
was not includible in gross income because of the application of the rollover
provisions in section 408(d)(3).

Section 408(d)(3)(E) of the Code provides that the rollover provisions of section

408(d)(3) do not apply to any amount required to be distributed under section
408(a)(6).

Section 408(d)(3)(I) of the Code provides that the Secretary of the Treasury may
waive the 60-day requirement under sections 408(d)(3)(A) and 408(d)(3)(D) where
the failure to waive such requirement would be against equity or good conscience,
including casualty, disaster, or other events beyond the reasonable control of the
individual subject to such requirement.

Section 3.02 of Revenue Procedure 2003-16, 2003-4 I.R.B. 359 ("Rev. Proc.
2003-16"), provides that the Service will issue a ruling waiving the 60-day rollover

requirement in cases where the failure to waive such requirement would be
against equity or good conscience, including casualty, disaster or other events
beyond the reasonable control of the taxpayer. In determining whether to grant a
waiver of the 60-day rollover requirement pursuant to section 408(d)(3)(I) of the
Code, the Service will consider all relevant facts and circumstances, including: (1)
errors committed by a financial institution; (2) inability to complete a rollover due to
death, disability, hospitalization, incarceration, restrictions imposed by a foreign
country or postal error; (3) the use of the amount distributed (for example, in the
case of payment by check, whether the check was cashed); and (4) the time
elapsed since the distribution occurred.

The information and documentation submitted are consistent with Taxpayer A's
assertion that she was unable to accomplish a rollover of Amount 1 within the 60-
day period prescribed by section 408(d)(3) of the Code because she was the
victim of a fraud scheme.

Therefore, pursuant to section 408(d)(3)(I) of the Code, the Service waives the 60-
day rollover requirement with respect to the distribution of Amount 1 from IRA B on
Date 2. Taxpayer A has 60 days from the issuance of this letter to contribute an
amount not to exceed Amount 1 into an IRA. Provided all other requirements of
section 408(d)(3), except the 60-day requirement, are met with respect to such
contribution, the contribution will be considered a rollover contribution within the
meaning of section 408(d)(3).

This ruling does not authorize the rollover of amounts that are required to be
distributed by section 401(a)(9) of the Code.

No opinion is expressed as to the tax treatment of the transactions described
herein under the provisions of any other section of either the Code or regulations
which may be applicable thereto.

This letter is directed only to the taxpayer who requested it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter ruling is
being sent to your authorized representative.

If you wish to inquire about this ruling, please contact (Identification
Number at . Please address all correspondence to
Sincerely,

, Acting Manager
Employee Plans Technical Group

Enclosures:
Notice of Intention to Disclose
Deleted copy of this letter

cc: