Hello,
I have an inherited 401k account (non spouse) that I was given bad information on by Fidelity in 2019. Basically I was told I had 10 years to cash it out, when in reality, I only had 5 years due to the family member passing in 2017 before the law was changed to the 10 year rule around 2019 or so (this past Monday 10/24 was 5 year since date of death).
Unfortunately thanks to this bad information Fidelity just automatically cashed out the entire 401k on the 5 year date which was this Monday, they withheld 20% federal taxes and mailed me a check for the rest. It would have been nice if they contacted me and informed me what was going on so I could have chosen to withhold more.
My question is, do I need to make an estimated tax payment now to cover the discrepancy between the 20% they withheld, and approximately what I will actually owe, or can it just wait until I file my taxes? For reference, based on my regular annual income this year, just about all of the 401k money distributed will be in the 24%, 32%, and 35% brackets, so the 20% withheld is low. This is a total disaster.
Thanks for any advice.
