Retirement Distributions and State Withholding

[hs_4513]

I'm a 24-year-old Californian and had a retirement plan with a previous employer which was "an IRS qualified 401(a)" My current employer which uses a whole different and separate retirement system will not accept the previous one as a direct rollover which means that I will likely have to just take the payment directly. I have two questions:

1. Do I choose a.) to withhold state income tax or b.) to NOT withhold state income tax unless mandated by law?

2. Would I need to fill out a 1099 R form if I'm having the retirement payment distributed directly to me?

Thanks! 

[AmyC]

Noooooo. Please talk to an investment adviser. Your pre-tax dollars can be rolled into a Traditional IRA while your after tax dollars can be rolled into a ROTH IRA. You do not have to take the distribution and the penalty.

If you do:

1. withholding state tax is recommended as the state wants to be paid when you are and you could encounter extra penalties.

2. If you take the distribution, you will receive a 1099-R to report the additional income on your taxes plus the 10% penalty.

If you choose to rollover the funds, you will get a 1099-R with a tax-free rollover code instead.