Inherited 401k with the 5 year rule

[xburtkneex]

Hi, just wondering what tax implications I would be facing if I don’t roll over the lump sum that was sent to me after the 5 year rule on my inherited 401k from my dad. It would not put me in a different tax bracket for the year. And on the check stub it says I already paid the federal taxes on it. 

[dmertz]

A distribution paid to you as a non-spouse beneficiary is not permitted to be rolled over.  The taxable amount of the distribution, which is often the entire distribution, is includible on Form 1040 line 5b.

Taxes were withheld from the distribution.  Tax withholding from any source is nothing more than a down payment toward the overall tax liability determined on your tax return.  Tax withholding from Forms 1099 is included as a credit on Form 1040 line 25b.  The actual addition to your tax liability caused by the distribution from the inherited 401(k) is not determined until you prepare your tax return.

[Opus 17]

If the 401k plan forced you to cash out for some reason, you had the option to rollover the money to an IRA, but this would be an "inherited IRA" that is subject to certain rules.  Inherited retirement plan funds can never be combined with your own funds as if they were yours.  

https://www.forbes.com/sites/jbrewer/2025/01/14/avoid-making-costly-moves-with-a-non-spouse-inherite...

If it is less than 60 days since you got the check, you should be able to open an "inherited IRA" at a bank or broker of your choice and deposit some or all of the money.  That would count as a rollover or partial rollover and the rollover portion is tax-free for now, although as I said, you have to follow certain other rules about withdrawing the money and paying tax.