An individual retirement account, or IRA, transfer goes directly from one IRA custodian to another and is not subject to the restrictions or taxes of a rollover, reports Marc Pearlman for About.com. An IRA rollover is a distribution a custodian pays directly to the owner of the account, and it is the owner's responsibility to contribute the funds into the new account within the time limit.Continue Reading
An IRA account owner who receives a distribution must roll the amount over into another IRA or qualified retirement plan within 60 days or the amount becomes subject to taxes and possible penalties, explains Pearlman. Besides paying regular income tax on withdrawals, account owners under age 59 1/2 must also pay a 10 percent early withdrawal penalty tax. A taxpayer who meets qualifying requirements can request an extension of the 60-day rollover time limit, states the Internal Revenue Service.
Although taxpayers can make only one IRA rollover in a 12-month period, they can make an unlimited amount of transfers, according to Pearlman. As of 2015, the single IRA rollover limit holds even if a taxpayer owns a number of IRAs, notes the IRS. An IRA distribution paid by a custodian to an account owner is subject to a 10 percent withholding tax, but the owner can have the custodian withhold a different amount or elect out of the withholding.Learn more about Investing