| Situation | Method | Reportable to IRS? |
|---|---|---|
| IRA to same-type IRA | Transfer | No |
| Employer plan to IRA | Direct rollover | Yes, no withholding |
| Any account to Solo 401(k) | Direct rollover | Yes, no withholding |
| Funds already distributed to you | Indirect rollover | Yes, 20% withheld, 60-day deadline |
What is an IRA transfer?
A transfer moves funds directly from one IRA to another IRA of the same type, institution to institution. Examples include Traditional IRA to Traditional IRA and Roth IRA to Roth IRA. The account holder never touches the funds in either case.
Transfers are initiated by the receiving custodian. You complete a transfer request form with the institution where your new account lives, and they contact the current custodian to pull the funds. IRA Resources handles inbound transfers this way, and fulfills outbound transfers on receipt of a request from the receiving institution.
Because the funds move directly between custodians and are never distributed to you, a transfer is not a reportable event to the IRS. There is no limit on how many transfers you can execute or how frequently. When a transfer is available to you, it's the preferred method: the lowest-risk way to move IRA funds.
What is a direct rollover?
A direct rollover moves funds between different plan types, most commonly from a former employer's 401(k), 403(b), or pension plan into an IRA. As with a transfer, the funds go plan to plan and are not distributed to you personally.
The mechanics work slightly differently. You request the rollover from the current plan administrator, who issues funds payable to the receiving plan rather than to you. It's common for employer plan administrators to mail a check made out to the new custodian, sent to your address. You receive that check physically, but since it isn't made out to you, forwarding it to the receiving IRA custodian still counts as a direct rollover.
A direct rollover also covers movement into a Solo 401(k), even when the source account would otherwise qualify for a transfer. Because a Solo 401(k) is a qualified plan rather than an IRA, the like-kind rule doesn't apply: money moving from a Traditional IRA into a Solo 401(k), for example, is a rollover, not a transfer, regardless of the source account type. You request the rollover with funds issued directly to the new plan, and once received, you deposit them into the plan account and record the transaction on a Rollover form, included in your plan documents.
Both institutions report the event, but there is no tax due and no withholding required. There is no IRS limit on the number of direct rollovers you can execute, though individual employer plan administrators may impose their own restrictions. See How do I roll over a 401(k) from a previous employer? for the receiving-account side of this process.
What is an indirect rollover, and what is the 60-day rule?
An indirect rollover is a different animal. Funds are distributed from the source plan directly to you, the account holder, and you then have 60 days to deposit them into a qualified retirement plan. Succeed, and the event is treated as a non-taxable rollover. Miss the deadline, and the full amount is treated as a taxable distribution, plus a 10% penalty if you are under age 59 1/2.
Two additional complications are worth understanding before choosing this route.
The one-per-year limit. The IRS allows only one indirect rollover per taxpayer per 12-month period, across all IRAs. This is a hard limit with no exceptions.
The 20% withholding problem. When an indirect rollover comes from an employer plan, a 401(k), 403(b), or similar, the plan administrator is required to withhold 20% for federal taxes at the time of distribution. You receive 80 cents on the dollar. To complete the rollover and avoid taxation on the full original amount, you must deposit 100% of the original balance into the new plan within 60 days, which means coming up with the withheld 20% out of your own pocket. The withheld amount is refunded to you as a tax credit when you file your return, but you have to fund the gap in the meantime.
Because of these risks, the indirect rollover is the method of last resort. Use a transfer or direct rollover whenever possible. See What is the 60-Day Rollover Rule? for more on this specific mechanism.
Which method applies to your situation?
If you are moving funds between two IRAs of the same type, that's a transfer, not a rollover. Use the receiving custodian's transfer request form.
If you are moving funds from a former employer's plan into an IRA, that's a direct rollover. Contact the plan administrator to initiate.
If you're moving funds into a Solo 401(k), that's always a direct rollover, even from an IRA of the same type. Request it as a rollover, not a transfer.
If funds have already been distributed to you personally and you need to deposit them into a retirement plan, that's an indirect rollover, and the 60-day clock is running from the date of distribution.
What about rolling over an employer plan specifically?
Rolling over a 401(k) or other employer plan carries a few additional considerations, including whether your current employer's plan is even eligible (see Can I roll over my current employer's 401(k)?), and what to weigh before moving employer stock. See What to know before rolling over an employer 401(k) for the full checklist.
Frequently Asked Questions
Does a transfer count against the one-per-year indirect rollover limit?
No. The one-per-year limit applies only to indirect rollovers. Transfers are unlimited in number and frequency, since the funds never pass through your hands and the transaction isn't reportable to the IRS at all.
What happens if I miss the 60-day window on an indirect rollover?
The full distribution becomes taxable income for the year, plus a 10% early withdrawal penalty if you're under age 59 1/2. There's no extension and no correction once the deadline passes.
Is there a limit on how many direct rollovers I can execute in a year?
No IRS limit exists. Individual employer plan administrators may impose their own restrictions on how often you can request a distribution, so check with the plan sending the funds.
My employer plan mailed a check made out to my new custodian, but sent it to my house. Is that still a direct rollover?
Yes. David ran into exactly this: his former employer's 401(k) administrator mailed a check payable to his new IRA custodian, addressed to David himself. Because the check wasn't made out to him personally, forwarding it on was still a direct rollover, not a distribution.
Do I need to report a transfer to the IRS?
No. A transfer isn't a reportable event at all. That's different from a direct rollover, which both institutions report even though no tax is due.
Is there ever a good reason to choose an indirect rollover on purpose?
Occasionally. If the sending institution is slow or unresponsive to a direct transfer or rollover request, an indirect rollover, where the funds are distributed to you directly, can move faster than waiting on an uncooperative custodian. That speed has to be weighed against the 60-day deadline, the 20% withholding on employer-plan money, and the one-per-year limit, so it's worth considering only when the direct route is genuinely stalled, not as a shortcut.
Next Steps
Once you know which method applies to your situation, the next step is confirming it lands in the right structure. See IRA Trust - Is It Right for You? or IRA LLC - Is It Right for You? to compare, or use the Plan Finder if you're still deciding.