I received a check for unclaimed property in texas that was an abandoned retirement account, do I need to reinvest that money or will I be taxed on it?
I'm not a tax person, so you'll need to wait to see if anyone comments here in that regard about any tax aspect. They may also need more info, such as if it was "your" account, a deceased relative's account and you're the executor or beneficiary, etc.
I'm going to ask @dmertz who is someone familiar with retirement plans if they have anything to say about this situation.
Was this unclaimed property that you received through the Texas Unclaimed Property website; i.e., from the State Comptroller? Such as listings at https://claimittexas.org/
As far as any reporting by the State of Texas, this is one of the FAQs at the Claim It Texas website:
No. If you have concerns about tax reporting, consult a tax preparation expert."
I edited the comment above, since you have not specifically said whether this was from the State of Texas Unclaimed Property website; i.e., from the State Comptroller. So I may have been assuming too much. The FAQ I mentioned above is for property listed on that website and obtained through that division of the Texas State Comptroller.
see this link
here's is a major point
if the state takes an unclaimed IRA or 401(k), it essentially liquidates the account and takes the money out of the tax-deferred shelter. In this event, the unclaimed property now becomes subject to income taxes in the year it liquidated the account. it will likely be substantial back taxes to be paid, and the tax-deferred nature of the retirement account will have been lost.
consult a tax pro in your state.
Assuming that this retirement account is not a retirement account inherited by a non-spouse beneficiary and that this was a qualified retirement account like an IRA or 401(k), it might be possible to roll the money over to an IRA to avoid current taxation and possible early-distribution penalty. The ability to do so generally depends on the rollover being completed within 60 days of constructive receipt of the distribution. Beyond that it might be possible to roll the distribution over after the 60-day deadline by applying IRS Revenue Procedure 2016-47, self-certifying that the circumstances qualify for a waiver of the deadline for one of the reasons indicated in the Revenue Procedure (although I don't know if these circumstances precisely meet any to the permissible reasons for missing the deadline, perhaps 3.02(2)(b) or (c)):
The IRS has actually granted for a particular taxpayer a waiver of the 60-day deadline under seemingly identical circumstances, so it seems reasonable that self-certification would be possible:
If it isn't rolled over, it will be subject to income tax and possible early-distribution penalty as indicated by HACKITOFF.