dmertz
Level 15

Retirement tax questions

First, because 20% was withheld for taxes, I suspect that the employer plan was a qualified retirement plan like a 401(k), not and IRA.  You'll want to be clear on the type of plan that the employer had because unlike IRA-to-IRA rollovers there are no limitations on how frequently you can do a rollovers from a qualified retirement plan.

 

This distribution in 2020 likely disqualifies you for some of the credit that you received on your 2019 tax return, so yes, you need to amend your 2019 tax return.

 

The 20% has already been withheld and that will be credited to you on your 2020 tax return.  To be able to roll that 20% over by the 60-day deadline you'll have to substitute other funds.

 

If you are under age 59½, just keeping the money will subject the entire amount, including the 20% withheld for taxes, to ordinary income tax plus a 10% early-distribution penalty on your 2020 tax return in addition to probably eliminating the $150 credit on your 2019 tax return.  Losing that much money by not rolling over the funds is generally not the best financial decision.