two quick questions about 401K

[JHH123]

Hi Team

I have 2 quick questions. 

1. My old company just changed the 401k provider. It is in transition. All of my money are in there. After changing to the new provider, do I need to report anything or pay any taxes? My old company even didnt notice me the change of their provider.

2. Can I transfer my 401k to a new company? Is there any time or amount limit for the transfer? I left the company for more than half year.

Thanks,

J

[Mike9241]

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.  

[dmertz]

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.

[JHH123]

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

[JHH123]

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

[dmertz]

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

[Mike9241]

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

[dmertz]

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.

[JHH123]

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

[JHH123]

@Mike9241 @dmertz 

[Mike9241 · Accepted solution]

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.

[JHH123]

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

J

[JHH123]

@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?

[Opus 17]

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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.

[JHH123]

got it,thanks

H