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Level 1

401k withdrawal at end of year that I want to roll over

This year I had a short term assignment with a consulting group that offered retirement savings. I put a small amount in a 401k before the assignment ended. The money sat in that account until the end of the year, while I waited for a merger at my new employer to get sorted out. Just before year end, the old employer's 401k sent me a check. I want to roll it into my new employer's 401k as soon as that's possible (a couple weeks) but I'm concerned because the withdrawal happened in TY2020 and the deposit will be in TY2021. Should I be concerned? Anything special I need to do paperwork-wise? 

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Level 15

401k withdrawal at end of year that I want to roll over

An indirect rollover (when you received the money) must be completed within 60 days of the date of the distribution.   The fact that it spans years is immaterial.

**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.**

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Level 15

401k withdrawal at end of year that I want to roll over

Also, since this distribution is eligible for rollover, 20% federal tax withholding would have been required.  To complete the rollover of the entire gross amount of the distribution you'll need to substitute other funds for any federal or state tax withholding.  Assuming that you do the rollover, when you enter the 2020 Form 1099-R while preparing your 2020 tax return you'll indicate that the distribution was moved to another retirement account and you'll indicate the amount of the distribution that was rolled over.

 

(Had you requested a direct rollover before the plan had to make the distribution on its own due to the balance being under the threshold for allowing the 401(k) account to maintained, mandatory tax withholding would have been avoided.  At least 30 days prior to making the distribution, the plan was required to have provided information regarding this and other distribution options)

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2 Replies
Level 15

401k withdrawal at end of year that I want to roll over

An indirect rollover (when you received the money) must be completed within 60 days of the date of the distribution.   The fact that it spans years is immaterial.

**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.**

View solution in original post

Level 15

401k withdrawal at end of year that I want to roll over

Also, since this distribution is eligible for rollover, 20% federal tax withholding would have been required.  To complete the rollover of the entire gross amount of the distribution you'll need to substitute other funds for any federal or state tax withholding.  Assuming that you do the rollover, when you enter the 2020 Form 1099-R while preparing your 2020 tax return you'll indicate that the distribution was moved to another retirement account and you'll indicate the amount of the distribution that was rolled over.

 

(Had you requested a direct rollover before the plan had to make the distribution on its own due to the balance being under the threshold for allowing the 401(k) account to maintained, mandatory tax withholding would have been avoided.  At least 30 days prior to making the distribution, the plan was required to have provided information regarding this and other distribution options)

View solution in original post

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