There are no taxes or penalties on a rollover to a Traditional IRA. You should have the 401(k) administrator make a trustee-to-trustee rollover to avoid mandatory 20% tax withholding on a 401(k) distribution. You would receive a 1099-R for the year that the rollover took place with a code "G" in box 7 if it is a trustee-to-trustee rollover.
Any distribution from the Traditional IRA would be taxed as ordinary income and subject to a 10% early distribution penalty if under age 59 1/2.
**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.**
