How long to roll 401K distribution

[bobsimmons]

I am helping my 25 year old friend do his 2019 taxes and he got a 1099-R.  He tells me that his former employer closed out his 401K and sent him a check unsolicited for the full amount (only about $200)  He did not realize using the money would be a taxable event with  penalty.  Is it too late for him to open a rollover IRA with the amount of the disbursement in order to avoid taxes and penalty?  He received the disbursement moree than 60 days ago.

[xmasbaby0]

Too late then.  He had 60 days to roll it over.  Now it will be taxed.  The 1099R must be entered on his tax return.

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.

[dmertz · Accepted solution]

Too late.  To conform to section 402(f) of the tax code, unless your friend waived the requirement the employer would have provided your friend with an explanation of the options, including the option to roll over the distribution and the fact that taking the distribution in cash would result in a taxable distribution and early-distribution penalty.

[Amyswedenborg]

I was terminated from my job because I fell very ill. I could not have rollover my 401k until I felt good enough to do it. Is there an exemption?

[MayaD]

You usually have 60 days to roll it over.

See if the reason that your rollover wasn’t completed within 60 days is on the list of 11 circumstances the IRS says may justify a waiver.

[dmertz]

Being seriously ill is one of the reasons that can be used for self-certification under IRS Revenue Procedure 2016-47 that you would qualify for a waiver of the 60-day rollover deadline, as long as the rollover was completed as soon as practical after the illness no longer prevented you from completing the rollover.  30 days is a safe-harbor provision for this.  This self-certification permits a qualified retirement plan to accept the rollover after the 60-day deadline.

IRS Rev. Proc 2016-47:  https://www.irs.gov/pub/irs-drop/rp-16-47.pdf

If you do not complete the rollover, having been ill does not prevent you from being subject to tax or to the early-distribution penalty.