two quick questions about 401K

question 1) this is not a taxable event. There was nothing that needed to be reported for tax purposes.

question 2) ask your former and current employer/administrators.  It really depends on what each plan provides for. you may also have the option of rollong your 401k into an IRA

direct rollovers - trustee to trustee transfers are best because there's no withholding. if you were to take the money personally there is required withholding of 20% which you either will pay income taxes (maybe penalties also) on or need to make up personally when opening. the new account. you have 60 days to complete the transaction - get the money and put it in the new account. Failure would make the entire amount of the account taxable and possibly subject to penalties if you are not 59-1/2.  

Regarding question #2, if you are under age 59½ and still employed with the company, there are limitations on moving funds currently in the 401(k) to another qualified retirement account.   If under age 59½ and still employed, (except for a hardship distribution which is ineligible for rollover) no distribution of employee elective deferrals is permitted, so these must remain in the 401(k).  Depending on the plan agreement, if under age 59½ and still employed with the company it may be that other amounts are also not permitted to be distributed; you'll have to examine the plan agreement.

many thanks. So, if I contact my current employor to do the transfer, I believe it means direct rollovers and therefore personally I do not need to do anything, right? @Mike9241 

J

many thanks. Do you mean it is better to do the direct rollover? Ask the new employer to transfer the old fund the new one and then there is no limitation? 

J

Moving funds from a 401(k) to another qualified retirement account by direct rollover avoids mandatory minimum 20% tax withholding.

while most companies will do a direct rollover, you need to ask. No law requires them to do so. 

Section 401(a)(31) of the tax code requires that the plan offer the option to do a direct rollover on the otherwise taxable portion of a distribution from a 401(k), thus avoiding mandatory 20% tax withholding on the taxable amount of the distribution.

many thanks. so, ask the new emploer to do the fund transfer can avoid both 20% hold and 60 days to complete, right? After that, do I need to report anything? 

J

@Mike9241 @dmertz 

you should get a 1099R for 2024 if should have code G (box 7) which tells the IRS it's nontaxable because it was a direct rollover. 

Tip: Make sure you see the letter “G” on your 1099-R form (in Box 7), which indicates that you did a rollover. This is especially confusing when financial institutions use the word “distribution” for your rollover.
Errors in Reporting 401(k) Rollovers
If you do not have a G in box number seven, you will have a problem. Your 401k provider reported the rollover incorrectly, and this will cause some headaches for you. The IRS will believe that you didn’t roll the funds to another retirement account, which means you would owe income tax (and possibly penalties) on it.

Call the investment provider or your former employer. It’s important to be proactive if you discover an error — if you wait you’ll just forget all of the details of the transaction, who you talked to, and where things could have gone wrong. Start by contacting the company that printed the check (the investment provider) — they should have all of the records necessary.

When rollovers are not coded correctly — and not corrected — you’ll eventually get a letter from the IRS stating that you under-reported your income. They show the distribution as income you received, and they expect some taxes. it’s best to get a corrected 1099 to the IRS that you actually rolled the money over.

many thanks. So, finally report 1099R (g) into the turbotax and finally has no tax payment, right?

J

@Mike9241 @dmertz sorry, guys, did you see this question? many thanks. So, finally report 1099R (g) into the turbotax and finally has no tax payment or other action, right?

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@JHH123 wrote:

@Mike9241 @dmertz sorry, guys, did you see this question? many thanks. So, finally report 1099R (g) into the turbotax and finally has no tax payment or other action, right?

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You will receive a 1099-R from plan #1 (your former employer's plan).  It should have code G.  You will need to enter this on your tax return so the paperwork matches in the IRS computer, but no taxes are owed.

got it,thanks

H

Hi, one quick question.

If I firstly plan to roll over the fund to the new employer 401k (initialise the process), but I didnt request the old employer pension to roll it out. I assume it means the process didnt officially start yet and there will not be any taxable event or 1099 R, right? @Opus 17 @Mike9241 @dmertz 

Thanks

if you do a direct rollover of 100% of your account there is nothing to tax. it's when employees liquidate their accounts and there is withholding or they don't complete the rollover in 60 days- when tax issues start. 

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@Helen123 wrote:

Hi, one quick question.

 

If I firstly plan to roll over the fund to the new employer 401k (initialise the process), but I didnt request the old employer pension to roll it out. I assume it means the process didnt officially start yet and there will not be any taxable event or 1099 R, right? @Opus 17 @Mike9241 @dmertz 

 

Thanks

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You've posted a new question to an old thread, so we don't have any more information than your few words and we don't know if your situation is similar to other people in the discussion.

If you have a pre-tax 401k at an old employer, and you want to roll it over to the pre-tax 401k at a new employer, that is not a taxable event, so it doesn't matter what date the transaction settles.   If you have after-tax funds in the 401k (this is uncommon but it does happen) then things are a little more complicated and we need more details to give you the right instructions.  

Hi, I plan to do the pre-tax 401 K direct roll over. I started transferring money in from the new employer 401k, but I have not started transferring money out from the old 401k. I assume I have not started the roll over yet and will not receive 1099R and no tax event starts. Is it correct? @Opus 17 

Thanks,

Helen

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@Helen123 wrote:

Hi, I plan to do the pre-tax 401 K direct roll over. I started transferring money in from the new employer 401k, but I have not started transferring money out from the old 401k. I assume I have not started the roll over yet and will not receive 1099R and no tax event starts. Is it correct? @Opus 17 

 

Thanks,

 

Helen

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Your question is still a bit confused, I'm not sure the terms you are using.  If you are contributing funds to a 401k at your new employer via payroll deduction, that is never reported on a 1099, only on your W-2.  A 1099 is issued for a withdrawal.  If the withdrawal from the old 401k was not made in 2024, there will be no 1099-R for 2024.  (And in fact, there are some cases where a 1099-R is not even issued.  A direct rollover from one 401k to another may be one of those cases, as long as the money is directly transferred and doesn't come into your hands temporarily.  Other experts know these exceptions better than I do.)

A direct rollover from one 401(k) to another involves  is a distribution from the old 401(k) paid directly to the new 401(k) account.  The process generally should begin with the new plan as you have done, allowing the new plan to specify to the old plan the actual account to which the funds are to be paid.  The old plan then makes a distribution payable to that account, either by funds transfer or by issuing a check made payable to that account which can be sent directly to the new plan or can be sent to you for delivery to the new plan.  In any event, with a direct rollover the funds are not made payable to you, but are instead paid to the new plan for your benefit.  The transaction is reported by the old plan on a Form 1099-R for the year in which the distribution from the old plan occurs and is reportable on your tax return for that year.  On your tax return the direct rollover to the new 401(k) will be shown as nontaxable.

many thanks. @dmertz  1. So, this is 100% non-taxable event, right?

2. The old plan can only deliver the check to me to deliver to the new plan rather than directly send to the new plan. Since, I have not requested the old plan to send the check to me yet. So, I will not receive the 1099 R and nothing to report, right?

Thanks.

Helen

This constitutes a distribution from the old 401(k), so the old 401(k) plan is required to issue a Form 1099-R.  A Form 1099-R for a direct rollover to the new plan will have code G in box 7 and will have $0 in box 2a as the taxable amount.  Unlike with IRAs, a funds in a 401(k) can only be moved by distribution and rollover, not by nonreportable trustee-to-trustee transfer.

You should make sure that the check is made payable to the new plan for your benefit and should indicate the 401(k) account that is to receive this rollover.  Assuming it's from the traditional account in the old plan, it should indicate that your traditional account in the new 401(k) plan is to receive this rollover.  With the check made out to your new 401(k) for your benefit, you'll simply forward the check to the new plan.  You are simply involved in delivering the check, you are not involved in the financial transaction itself because the funds are not made payable to you.

many thanks. That is super helpful. Since I didnt start requesting the check from old 401k, I will not receive 1099 R this year and nothing needs to report, right?

H

Correct.  With the distribution from the old 401(k) occurring in 2025, it will be reportable on your 2025 tax return.