! you decide — Publication 575 — Pension and Annuity Income

CAUTION tribution before withholding, your contribution to

the new plan or IRA must include other money (for exam- ple, from savings or amounts borrowed) to replace the amount withheld.

Example. You receive an eligible rollover distribution of $10,000 from your employer’s qualified employee plan. The payer withholds $2,000, so you actually receive $8,000. If you want to roll over the entire $10,000 to postpone including that amount in your income, you will have to get $2,000 from some other source to add to the $8,000 you actually received.

If you roll over only $8,000, you must include the $2,000 not rolled over in your income for the distribution year. Also, you may be subject to the 10% additional tax on the $2,000 if it was distributed to you before you reached age 59 ¹ /2.

Time for making rollover. You must generally complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer’s plan.

The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control.

Example. In the previous example, you received the distribution on June 30. To postpone including it in your income, you must complete the rollover by August 29, the 60th day following June 30.

22 Publication 575 (2025)

Plan loan offset. A plan loan offset is the amount your employer plan account balance is reduced, or offset, to repay a loan from the plan. How long you have to complete the rollover of a plan loan offset depends on what kind of plan loan offset you have. For tax years beginning after 2017, if you have a qualified plan loan offset, you will have until the due date (including extensions) for your tax return for the tax year in which the offset occurs to complete your rollover.

A qualified plan loan offset occurs when a plan loan in good standing is offset because your employer plan terminates, or because you have a severance from employment. If your plan loan offset occurs for any other reason, then you have 60 days from the date the offset occurs to complete your rollover.

Ways to get a waiver of the 60-day rollover require- ment. There are three ways to obtain a waiver of the 60-day requirement.

You qualify for an automatic waiver.
You self-certify that you meet the requirements of a waiver.
You request and receive a private letter ruling granting a waiver.

For more information about requesting a waiver of the 60-day rollover requirement, rollovers permitted between the various types of retirement plans (including IRAs), and other topics regarding rollovers, see Rollovers in Pub. 590-A.

Frozen deposits. If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended. An amount is a frozen deposit if you can’t withdraw it because of either:

The bankruptcy or insolvency of the financial institution, or
A restriction on withdrawals by the state in which the institution is located because of the bankruptcy or insolvency (or threat of it) of one or more financial institutions in the state.

The 60-day rollover period is extended by the period for which the amount is a frozen deposit and doesn’t end earlier than 10 days after the amount is no longer a frozen deposit.

Retirement bonds. If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA or qualified employer plan. Subsequent distributions of those proceeds, however, don’t qualify for the 10-year tax option or capital gain treatment.

Annuity contracts. If an annuity contract was distributed to you by a qualified retirement plan, you can roll over an amount paid under the contract that is otherwise an eligible rollover distribution. For example, you can roll over a single-sum payment you receive upon surrender of the contract to the extent it is taxable and isn’t an RMD.

Rollovers of property. To roll over an eligible rollover distribution of property, you must either roll over the actual property distributed or sell it and roll over the proceeds. You can’t keep the distributed property and roll over cash or other property.

If you sell the distributed property and roll over all the proceeds, no gain or loss is recognized on the sale. The sale proceeds (including any portion representing an increase in value) are treated as part of the distribution and aren’t included in your gross income.

If you roll over only part of the proceeds, you are taxed on the part you keep. You must allocate the proceeds you keep between the part representing ordinary income from the distribution (its value upon distribution) and the part representing gain or loss from the sale (its change in value from its distribution to its sale).

Example 1. On September 4, 2025, Paul received an eligible rollover distribution from his employer’s noncontributory qualified employee plan of $50,000 in nonemployer stock. On September 24, 2025, he sold the stock for $60,000. On October 2, 2025, he contributed $60,000 cash to a traditional IRA. Paul doesn’t include either the $50,000 eligible rollover distribution or the $10,000 gain from the sale of the stock in his income. The entire $60,000 rolled over will be ordinary income when he withdraws it from his IRA.

Example 2. The facts are the same as in Example 1 , except that Paul sold the stock for $40,000 and contrib- uted $40,000 to the IRA. Paul doesn’t include the $50,000 eligible rollover distribution in his income and doesn’t deduct the $10,000 loss from the sale of the stock. The $40,000 rolled over will be ordinary income when he withdraws it from his IRA.

Example 3. The facts are the same as in Example 1, except that Paul rolled over only $45,000 of the $60,000 proceeds from the sale of the stock. The $15,000 proceeds he didn’t roll over include part of the gain from the stock sale. Paul reports $2,500 ($10,000 ÷ $60,000 × $15,000) as capital gain and $12,500 ($50,000 ÷ $60,000 × $15,000) as ordinary income.

Example 4. The facts are the same as in Example 2, except that Paul rolled over only $25,000 of the $40,000 proceeds from the sale of the stock. The $15,000 proceeds he didn’t roll over include part of the loss from the stock sale. Paul reports $3,750 ($10,000 ÷ $40,000 × $15,000) capital loss and $18,750 ($50,000 ÷ $40,000 × $15,000) ordinary income.

Property and cash distributed. If both cash and property were distributed and you didn’t roll over the entire distribution, you may designate what part of the rollover is allocable to the cash distribution and what part is allocable to the proceeds from the sale of the distributed property. If the distribution included an amount that isn’t taxable (other than the NUA in employer securities) as well as an eligible rollover distribution, you may also designate what part of the nontaxable amount is allocable to the cash distribution and what part is allocable to the property. Your

Publication 575 (2025) 23

designation must be made by the due date for filing your tax return, including extensions. You can’t change your designation after that date. If you don’t make a designation on time, the rollover amount or the nontaxable amount must be allocated on a ratable basis.

Qualified domestic relations order (QDRO). You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. (See Qualified domestic relations order (QDRO) under General Information , earlier.) If you receive the dis- tribution as an employee’s spouse or former spouse (not as a nonspouse beneficiary), the rollover rules apply to you as if you were the employee.

Rollover by surviving spouse. You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. The rollover rules apply to you as if you were the employee. You can roll over the distribution into a qualified retirement plan or a traditional or Roth IRA. For a rollover to a Roth IRA, see Rollovers to Roth IRAs, later.

A distribution paid to a beneficiary other than the employee’s surviving spouse is generally not an eligible rollover distribution. However, see Rollovers by nonspouse beneficiary next.

Rollovers by nonspouse beneficiary. If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Pub. 590-B.

How to report. Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, 1040-SR, or 1040-NR, line 5a. This amount should be shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Enter the remaining amount, even if zero, on Form 1040, 1040-SR, or 1040-NR, line 5b. Also, check box 1 for “Rollovers.”

Written explanation to recipients. The administrator of a qualified retirement plan must, within a reasonable period of time before making an eligible rollover distribution, provide you with a written explanation. It must tell you about all of the following.

Your right to have the distribution paid tax free directly to another qualified retirement plan or to a traditional or Roth IRA.
The requirement to withhold tax from the distribution if it isn’t directly rolled over.
The nontaxability of any part of the distribution that you roll over within 60 days after you receive the distribution.
Other qualified retirement plan rules that apply, including those for lump-sum distributions, alternate payees, and cash or deferred arrangements.
How the distribution rules of the plan to which you roll over the distribution may differ from the rules that apply to the plan making the distribution in their restrictions and tax consequences.

Reasonable period of time. The plan administrator must provide you with a written explanation no earlier than 90 days and no later than 30 days before the distribution is made. However, you can choose to have a distribution made less than 30 days after the explanation is provided as long as the following two requirements are met.

You must have the opportunity to consider whether or not you want to make a direct rollover for at least 30 days after the explanation is provided.
The information you receive must clearly state that you have the right to have 30 days to make a decision.

Contact the plan administrator if you have any questions regarding this information.

Designated Roth accounts. You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. If you want to roll over the part of the distribution that isn’t included in income, you must make a direct rollover of the entire distribution (see Direct rollover option, earlier) or you can roll over the entire amount (or any portion) to a Roth IRA. Also, if you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan (in-plan Roth rollover). The rollover of any untaxed amounts is included in income. See In-plan Roth rollovers , later.

A qualified distribution from a designated Roth account isn’t includible in income. (A qualified distribution is defined earlier in the discussion of designated Roth ac- counts under Taxation of Periodic Payments ).

If you roll over only part of an eligible rollover distribu- tion that isn’t a qualified distribution and not paid as a direct rollover contribution, the part rolled over is considered to be first from the income portion of the distribution.

Example. You receive an eligible rollover distribution that isn’t a qualified distribution from your designated Roth account. The distribution consists of $11,000 (investment) and $3,000 (income earned). Within 60 days of receipt, you roll over $7,000 into a Roth IRA. The $7,000 consists of $3,000 of income and $4,000 of investment. Because you rolled over the part of the distribution that could be included in gross income (income earned), none of the distribution is included in gross income.

In-plan Roth rollovers. If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over any vested amounts from those plans to a

24 Publication 575 (2025)

designated Roth account within the same plan. The in-plan Roth rollover must be an eligible rollover distribution (defined earlier under Eligible rollover distribution ). Any untaxed amounts included in the in-plan Roth rollover must be included in income in the year you receive the distribution.

You can make the in-plan Roth rollover by direct transfer of the amount from the non-Roth account to your designated Roth account within the same plan. The 20% mandatory withholding doesn’t apply to in-plan Roth rollovers made by direct rollover. You can also effect the in-plan Roth rollover by receiving an eligible rollover distribution from your 401(k), 403(b), or 457(b) plan and within 60 days depositing it into a designated Roth account in the same plan.

Your plan must provide a written explanation of the consequences of making an in-plan Roth rollover. In-plan Roth rollovers can’t be undone. Unlike rollovers to Roth IRAs, you can’t later recharacterize an in-plan Roth rollover.

If you received employer securities as a part of

TIP your in-plan Roth rollover distribution, the rollover

is treated as a distribution for the purpose of NUA. See Distributions of employer securities , earlier.

Mandatory 20% withholding. A payor must normally withhold 20% when a rollover distribution is paid to you. However, some part of your distribution may not be subject to the mandatory 20% withholding. Otherwise nondistributable amounts aren’t subject to the mandatory 20% withholding. An example of otherwise nondistributable amounts is employer matching contributions in a 401(k) plan. See Payment-to-you option, earlier.

in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that was taxable to you when paid.

Any amount rolled over into a Roth IRA is subject to the same rules for converting a traditional IRA into a Roth IRA. For more information, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1 of Pub. 590-A.

How to report. Enter the total amount of the distribution before income tax or deductions were withheld on Form 1040, 1040-SR, or 1040-NR, line 5a. This amount should be shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Enter the remaining amount, even if zero, on Form 1040, 1040-SR, or 1040-NR, line 5b. Check box 1 on Form 1040, 1040-SR, or 1040-NR, line 5c, if you have a rollover, including a direct rollover, from one qualified employer’s plan to another or to an IRA.