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emschwa99
New Member

My old employer cashed out my 401k. Turbo tax is not allowing me to claim any early retirement withdrawals. How do I claim it?

 
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2 Replies
DaveF1006
Expert Alumni

My old employer cashed out my 401k. Turbo tax is not allowing me to claim any early retirement withdrawals. How do I claim it?

It depends.  According to this link from IRS, the only exception is if you  separate from service during or after the year the you reach age 55. (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit plan).  Do you fall within these parameters?

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My old employer cashed out my 401k. Turbo tax is not allowing me to claim any early retirement withdrawals. How do I claim it?

If your employer closes your 401(k), for example because you leave service and the account is too small for them to maintain, you have 60 days to establish a rollover IRA with another broker or custodian. If you do that, you don’t pay tax on the money and it will continue to grow in a protected retirement account until you retire. If you kept the money and did not establish a rollover IRA, then it is subject to regular income tax plus a 10% penalty if you are under age 55. Unfortunately, there is no exception for involuntary conversion if you did not do the rollover in time.  

Your former employer and the 401(k) custodian were probably required to tell you about these rules before they sent you the check.

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