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Retirement tax questions
If you want to roll it into an IRA then call the plan administrator and tell them you want a direct rollover into an IRA and *not* a check. What is the difference? - with a direct trustee-to-trustee rollover the entire amount in the 401(k) plan is transferred to an IRA tax free, with a check, they are *required* to withhold 20% for tax which will become taxable income to you and also subject to a 10% early distribution penalty if you are under age 59 1/2 and you can then only rollover the remaining 80% to an IRA unless you make up the 20% difference form other funds which you are allowed to do. You would eventually recover the 20% withholding when you file the next years tax return and apply the withholding to your tax liability, but it is better to avoid it at the onset and if under age 59 1/2 the 10% additional penalty on the amount of tax withholding will be lost.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
‎June 4, 2019
1:55 PM