Another piece of information that may be useful is that I did not add $1600 back to the Roth IRA with my own money within 60 days of the roll over. Do you think that makes a difference?
I had the impression that the $1600 withheld federal tax was subject to penalty after I read the example from IRS (https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-...).
"Example: Jordan, age 42, received a $10,000 eligible rollover distribution from her 401(k) plan. Her employer withheld $2,000 from her distribution.
- If Jordan later decides to roll over the $8,000, but not the $2,000 withheld, she will report $2,000 as taxable income, $8,000 as a nontaxable rollover, and $2,000 as taxes paid. Jordan must also pay the 10% additional tax on early distributions on the $2,000 unless she qualifies for an exception.
- If Jordan decides to roll over the full $10,000, she must contribute $2,000 from other sources. Jordan will report $10,000 as a nontaxable rollover and $2,000 as taxes paid.
If you roll over the full amount of any eligible rollover distribution you receive (the actual amount received plus the 20% that was withheld - $10,000 in the example above):
- Your entire distribution would be tax-free, and
- You would avoid the 10% additional tax on early distributions."
The scenario from the example is roll over from a pre-tax plan to traditional IRA plan so the tax portion is different but I thought the penalty portion was the same as my scenario.
Thank you very much again. Really appreciate your help and input.
@DaveF1006
