dmertz
Level 15

Deductions & credits

The only way that you can avoid the mandatory tax withholding is by doing a direct rollover of the money to a traditional IRA (where the distribution is paid directly to the receiving IRA, not paid to you, and is exempt from the mandatory tax withholding because such a rollover is nontaxable), then taking distributions from the traditional IRA.  Unlike eligible rollover distributions from a 401(k), distributions from an IRA have default federal withholding of 10% but you are permitted to opt out of tax withholding and there is no default Maryland tax withholding.