Hi Benscoro,
If the money in your retirement account is pre-tax you would be responsible for paying tax on the distribution. One way to avoid paying tax at this time is to open a Rollover IRA at a different financial institution and ask the retirement company to move the funds directly into that account. Here is some information on how to complete a rollover in case that is something that you are interested in doing.
How do I complete a rollover?
- Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
- Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
- 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan (see below), so you’ll have to use other funds to roll over the full amount of the distribution.
Good luck with your situation and let us know if you have additional questions.
AnthonyC_CPA