Beware the 60-Day Rollover

Over time, you may have accumulated multiple IRAs with various financial institutions, which can make it difficult to get a clear picture of your investment performance. Moving all your IRAs to a single firm can help—but be careful how you go about it. If you act as the middleman, you could get hit with a tax bill.
There are two ways to transfer an IRA:

• A direct (a.k.a. “trustee-to-trustee”) transfer, in which the funds never pass through the investor’s hands and there are no tax consequences.
• An indirect transfer (a.k.a. “60-day rollover”), in which you liquidate your IRA, take possession of the funds and have up to 60 days to deposit the money into another IRA. Miss the 60-day window and the funds could be subject to ordinary income tax (plus any applicable early-withdrawal penalties), undercutting the benefits of opening an IRA in the first place.

The IRS limits retirement savers to one 60-day rollover per 12-month period (regardless of how many IRA accounts they hold) in order to discourage abuse of the provision as a short-term personal loan strategy. While there are some honor-system exceptions for those who miss the 60-day window—including postal error and misplacing your disbursement check—you could still end up owing penalties and taxes if the agency later disputes your exceptions.
The bottom line: When consolidating IRA accounts, it’s best to transfer the funds directly between institutions, lest the taxman come calling.