Why can't you deposit more? 5,500 is for new contributions not rollovers. No limit on rollovers. Or is this after 60 days? If it's too late to roll it over then you have to count it as taxable income.
Has it been less than 60 days since you took the distribution?
Thanks everyone for all responses. Issue solved. I tried to deposit the indirect rollover with a deposit into the the (traditional) IRA account. This method was considered a contribution, hence the $5,500. limit in the online deposit page. I needed to fill out an indirect deposit form from TradeKing along with a check. Fedexed it in, check cleared 3 business days later. Thanks!
When you withdrew money from your 401(k) that was a reportable event. (I said *reportable, not taxable).
If you put that money regardless of the amount since there is no limit, into another retirement vehicle such as an IRA and you do it within 60 days of withdrawal from the 401(k), then your reportable withdrawal event is not taxable and no fines are assessed.
If you put the money into a ROTH IRA, then the entire amount is taxable income, but no fines are assessed.
If you do not do either of the above, then the entire amount withdrawn is taxable income in the tax year of the withdrawal. If you are not of retirement age on the date of withdrawal, then the entire amount is subject to a 10% penalty in addition to the taxes you will pay on it also.
Note that if taxable, then it will be included as a part of your MAGI for the year and has the potential to put you into a significantly higher tax bracket for that tax year too. If your MAGI is high enough, you also lose many of the tax credits and other deductions you would otherwise qualify for. As an example, if you have a kid in college and your MAGI is over $160K for the tax year, then you don't qualify to take any of the education credits associated with any college expenses you may have paid for your dependent student.
If you were 55 or older when you were laid off that is an exception to the 10% early withdrawal penalty. So hopefully you can avoid that.
Did they take out any withholding from it?
He mentioned $5500, so it sounds like he is less than age 50.
Make sure that your IRA custodian knows (and will report to the IRS) that this is a Rollover Contribution, not a regular contribution of new retirement money subject to annual limits. Generally this is done by properly filling out the IRA custodian's paperwork to indicate that this is money being rolled over from another retirement account.
When reporting such a rollover in TurboTax, do not enter this as a new, regular IRA contribution under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions. Enter the Form 1099-R exactly as received under Wages & Income (or Personal Income) -> Retirement Plans and Social Security -> IRA, 401(k), Pension Plan Withdrawals (1099-R), then answer the follow-up questions to indicate that you moved the money to another retirement account and that you rolled the money over to a traditional IRA.