Final answer:
Exceeding the 60-day window for an IRA to qualified plan rollover can lead to the funds being considered taxable distribution, potentially with additional penalties, affecting the tax-deferred status of IRA funds.
Step-by-step explanation:
When transferring funds from one Individual Retirement Account (IRA) to another qualified plan, it's important to do so within a 60-day window to avoid tax penalties. If a rollover takes more than 60 days, the amount not contributed to the qualified plan within that time period is generally considered a taxable distribution. For a traditional IRA, this amount may also be subject to a 10% early withdrawal penalty if the account holder is under the age of 59 and a half. The withdrawn amount becomes part of the taxable income and is taxed at the individual's current income tax rate. Therefore, it is crucial to complete the transfer within the specified timeframe to maintain the tax-deferred status of IRA funds.