IRA CD Rollover Rules: Deadlines, Withholding, and RMDs

The cleanest way to follow the IRA CD rollover rules is to ask your current custodian for a direct trustee-to-trustee transfer to the new IRA, timed to the CD’s maturity grace period so no early withdrawal penalty applies. Done that way, no money passes through your hands, nothing is withheld, the 60-day clock never starts, and the one-rollover-per-year limit doesn’t apply. The mistakes that turn a routine move into a taxable event almost always come from taking a check instead.

Direct Transfer or 60-Day Rollover

The IRS treats these as two different transactions, even though the end result looks the same.

A direct transfer sends the money straight from one IRA custodian to another. You never receive it. Because no distribution occurs, the transfer isn’t a “rollover” for IRS purposes at all: no withholding, no deadline, no annual limit, and generally no Form 1099-R.¹

A 60-day indirect rollover is the opposite. The custodian sends the money to you, and you have 60 calendar days to redeposit the full amount into another IRA. Miss the window and the distribution becomes taxable income. If you’re under 59½, add a 10% early distribution penalty on top.²

Indirect rollovers also run into the one-per-year rule. Since 2015, the IRS treats all your IRAs (traditional, Roth, SEP, and SIMPLE) as a single pool for this purpose. You get one indirect rollover across all of them in any 12-month period. A second one inside that window is treated as an excess contribution and hit with a 6% penalty every year it stays in the account.¹³ Direct transfers have no such cap. You can do them as often as you want.

Timing the Move Around CD Maturity

A CD isn’t a mutual fund. It’s a time-locked contract, and that changes when you should move it.

The ideal moment is the grace period right after maturity. Most banks and credit unions give you 7 to 10 calendar days after a CD matures to withdraw or transfer without a contract penalty, before the CD automatically renews into a new term. Miss it and you’re locked in again, sometimes for years. Because direct transfers between institutions typically take one to three weeks to process, start the paperwork before the maturity date, not after.

If you need to move the CD before it matures, the current custodian will liquidate it early and charge a contractual early withdrawal penalty. These are measured in forfeited interest and scale with the CD’s original term: a short-term CD under a year might cost one to three months of interest; a five-year CD can cost six to twelve months.

Here’s the distinction that matters. The CD early withdrawal penalty is a contract penalty between you and the bank. It is not an IRS tax penalty. As long as the money stays inside the IRA structure through a direct transfer, you owe no income tax and no 10% early distribution penalty. The CD penalty just reduces the amount that lands at the new custodian.

How to Request the Transfer

Call the receiving custodian first. They’ll usually initiate the transfer on their end and handle the paperwork with the sending institution. When you speak with the current custodian, use the phrase “trustee-to-trustee transfer.” If a check has to be issued, ask that it be made payable to the receiving institution “FBO [For the Benefit Of] Your Name,” not to you personally. That payee line is what keeps the transaction classified as a direct transfer. A check made payable to you is an indirect rollover, whether you meant to trigger one or not.

What Withholding Costs You If You Take the Check

Take the money personally and the IRS assumes it’s a distribution. On an IRA distribution, federal income tax is withheld at a default rate of 10%. You can elect out, but you have to do so in advance.⁴ Even if only 90% arrives in your account, you still have to redeposit 100% of the original distribution within 60 days to keep the rollover tax-free. The withheld portion comes back when you file your return, but you have to front it in the meantime.

Distributions from employer plans like a 401(k) or 403(b) are stricter. If the check is paid to you rather than sent directly to the new plan or IRA, the administrator must withhold 20%, and there’s no way to opt out.⁵ You still have to redeposit the pre-withholding amount to keep the whole thing tax-free. A direct transfer avoids all of this.

If You Miss the 60-Day Deadline

A blown indirect rollover is expensive. The distribution becomes taxable income, potentially with a 10% early distribution penalty, and if you deposited it into another IRA anyway, the deposit becomes an excess contribution subject to a 6% annual penalty until removed.³

There is a safety valve. Under Revenue Procedure 2016-47, you can self-certify to the receiving custodian that you missed the deadline for a qualifying reason and complete the rollover late. The IRS accepts self-certification for these reasons:⁶

A financial institution made an error processing the distribution or deposit
The distribution check was lost and never cashed
You deposited the funds into an account you mistakenly believed was an eligible retirement plan
Your principal residence was severely damaged
You or a family member died or was seriously ill
You were incarcerated
A foreign country imposed restrictions
The postal system failed to deliver in time
The distribution came from an IRS levy and the proceeds were later returned
The distributing institution delayed information the receiving plan needed

Once the reason no longer applies, you have 30 days to complete the rollover. You also have to certify in writing that the IRS hasn’t previously denied a waiver for that same distribution. No IRS pre-approval is required. You make the contribution, send the certification to the receiving custodian, and report it on your return. Keep documentation, because the IRS can audit the claim later.

Take Your RMD Before You Transfer

Once you reach age 73, you have to take annual required minimum distributions from your traditional, SEP, and SIMPLE IRAs.⁷ RMD amounts cannot be rolled over.

Satisfy the RMD for the year before you transfer the rest of the balance. If you accidentally roll over an amount that includes your RMD, the RMD portion is treated as an excess contribution, generating a 6% annual penalty for each year it sits in the receiving account, plus a possible 25% excise tax on the RMD shortfall itself (reduced to 10% if corrected within two years).⁷

Inherited IRA CDs Follow Different Rules

If you inherited the IRA CD, the rules depend on your relationship to the original owner.

A surviving spouse who is the sole beneficiary can roll the inherited IRA into their own IRA and treat it as if it had always been theirs, with their own RMD schedule and beneficiary designations. Alternatively, a spouse can keep it as an inherited account and take distributions under their own life expectancy or the 10-year rule if the original owner died in 2020 or later.⁸

Non-spouse beneficiaries have no rollover option. A 60-day rollover is not available for inherited IRA funds. The only way to move an inherited IRA CD is a direct trustee-to-trustee transfer into another inherited IRA. If a non-spouse beneficiary takes a check and deposits it into their personal IRA, that deposit is treated as a regular contribution rather than a rollover. The distributed amount becomes taxable income and the deposit likely generates excess contribution penalties. This is one of the costlier mistakes with inherited accounts.

Converting an IRA CD to a Roth

Converting a traditional, SEP, or SIMPLE IRA CD to a Roth IRA is allowed at any income level, but the full converted amount is added to your gross income for the year and taxed at your ordinary rate. There is no cap on how much you can convert in a single year.

If you’ve ever made nondeductible contributions to any traditional IRA, the pro-rata rule applies. The IRS treats all your non-Roth IRAs (traditional, SEP, and SIMPLE combined) as one pool when calculating the taxable portion of any conversion. Divide your total nondeductible contributions by the combined balance of all your non-Roth IRAs to get the tax-free percentage of the conversion. The rest is taxable. With $20,000 of after-tax basis and $200,000 total across all non-Roth IRAs, only 10% of any conversion comes out tax-free. Convert $50,000 and $45,000 of it is taxable. Report the calculation on Form 8606.⁹

SIMPLE IRAs come with an extra restriction. During the first two years of participation in your employer’s SIMPLE IRA plan, the money can only be transferred to another SIMPLE IRA. A Roth conversion or transfer to a traditional IRA during those two years is a taxable distribution with a 25% additional tax, not the usual 10%.¹⁰ After the two years, normal conversion rules apply.

Roth conversions have a hard December 31 deadline for the tax year they count toward. Contributions can be made up to April of the following year, but conversions cannot. If you’re converting a CD, build in enough time to liquidate it and process the transfer before year-end.

What You’ll See on Tax Forms

A direct trustee-to-trustee transfer between two IRAs generally produces no Form 1099-R at all. The IRS excludes these transfers from 1099-R reporting because no distribution occurs.¹¹ The receiving custodian files Form 5498 to record the incoming funds. Nothing appears on your Form 1040.

A direct rollover from an employer plan to an IRA generates a 1099-R with Code G in Box 7 and a taxable amount of zero in Box 2a. You still report it on Form 1040, but the taxable portion is zero.¹¹

A 60-day indirect rollover shows up as a full distribution on Form 1099-R with a code based on your age and account type: Code 1 for early distributions from a traditional IRA (under 59½), Code 7 for normal distributions (59½ or older), or Code J for early distributions from a Roth IRA.¹¹ The custodian has no way to know whether you completed the rollover, so it’s on you to report on Form 1040 that the funds were redeposited within 60 days and that the distribution is therefore non-taxable.¹

A Roth conversion from a traditional IRA is reported on Form 1099-R with Code 2 if you’re under 59½ or Code 7 if you’re 59½ or older.¹¹ File Form 8606 to calculate the taxable portion, whether or not you have after-tax basis in your IRAs.⁹

1
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
2
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
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Internal Revenue Service. Retirement Topics – IRA Contribution Limits
4
Internal Revenue Service. Publication 590-B (2025), Distributions From Individual Retirement Arrangements (IRAs)
5
eCFR. 26 CFR 31.3405(c)-1 – Withholding on Eligible Rollover Distributions
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Internal Revenue Service. Revenue Procedure 2016-47 – Waiver of 60-Day Rollover Requirement
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Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
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Internal Revenue Service. Retirement Topics – Beneficiary
9
Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
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Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules
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Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)