I received a check from Fidelity for my 401K but I didnt ask for it.

[kaitwalk923]

I worked at Starbucks up until the time that I started law school in August. While I was at Starbucks, I was contributing to my 401K each paycheck. Well, in December, I received a check from Fidelity as a cashout of my 401K. However, I did not request it and did not think anything was going to happen to it. So how do I reflect this on my taxes, or is it possible?

[RogerM · Accepted solution]

What is the amount of the check you received? Sometimes, if you no longer work for a company, and the amount in your 401(k) is less than $1000, the investment company will automatically disburse the amount to you. In that case, it does have to be reported as taxable income.

But it usually does take them a few months to disburse the funds. One way to avoid this is to roll the funds over from the 401(k) into a rollover IRA after you leave a job.

[kaitwalk923]

Thanks so much for the explanation. Explained my situation exactly.

[Kriswhalen]

So I have the same situation i didnt request it. Am i suppose to cash it like a regular check?

[SteamTrain]

@Kriswhalen 

Either that, or you can roll it over into an IRA account at a brokerage or bank within 60 days of the issue date.  IF you do that, then the rollover $$ will not be taxed.   Would be best if you also included any tax withholding they may have done when you roll it into an IRA.

IF you just cash it and keep it, the entire distribution will be taxed.....if the 401k account was closed before the end of 2019 , then you will likely get a 1099-R form sometime in the next ~ 3 weeks and you will need to include that in your 2019 tax file, and indicate then what you did with the $$  (Cashed and kept, or cashed BUT rolled over into another retirement account).  IF the account was actually closed in 2020, then the 1099-R form will not come until late Jan-Feb of 2021, and you will include the 1099-R in your 2020 tax return.

You should have received some instructions with the check to indicate when they will report it.  Or call the 401k administrator and ask...

[dmertz]

If you don't roll it over you might also be subject to a 10% early-distribution penalty on the taxable amount.