topic Re: Question Regarding Class Action Proceeds for a Retirement Account in Retirement tax questions

Question Regarding Class Action Proceeds for a Retirement Account

Robertatl123 — Sun, 03 Nov 2019 19:06:00 GMT

Hello,

I received a class action check the other day due to a settlement from a former employer retirement account. The check has already had 20% federal taxes withdrawn. I will be receiving a 1099-R as well. Would I be able to deposit the check to my 401k and receive back the taxes paid out? Should I expect to see additional taxes or penalties (like early withdraw penalties) when I deposit the check?

Thank you.

Re: Question Regarding Class Action Proceeds for a Retirement Account

dmertz — Sun, 03 Nov 2019 21:16:27 GMT

To avoid this being taxable by rolling over the entire gross amount distributed, which includes the amount withheld for taxes, and meet the 60-day rollover deadline, you'll need to substitute other funds to replace the amount withheld. The amount withheld will be credited on your 2019 tax return and you'll receive a refund of any excess tax withholding after filing your 2019 tax return. Any portion of the gross amount not rolled over will be subject to tax and potential early-distribution penalty on your 2019 tax return.

Re: Question Regarding Class Action Proceeds for a Retirement Account

Robertatl123 — Tue, 05 Nov 2019 11:10:43 GMT

Thank you!