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401K question

 
 
Linkat
 
  1  
Reply Wed 22 Oct, 2008 03:14 pm
@Linkat,
That's also why I always advise people to seek out an experienced advisor - you really need advice based on your personal situation - you can't give complete advice in this sort of forum, just this is what is best in most situations.
TTH
 
  1  
Reply Wed 22 Oct, 2008 03:16 pm
@Linkat,
Linkat wrote:

Then this is not a rollover - this is a cash withdrawal and then a deposit into an IRA. Semantics I know but if you process a rollover as a rollover then there are no penalties or taxes charged.
A cash withdrawal from an IRA and then a deposit of that money into an IRA is a rollover. It may be semantics, but it is important.

If a distribution is paid to you, you have 60 days from the date you receive it to roll it over. Any taxable distribution paid to you is subject to a mandatory withholding of 20%, even if you intend to roll it over later. If you do roll it over, and want to defer tax on the entire taxable portion, you will have to add funds from other sources equal to the amount withheld. You can choose to have your employer transfer a distribution directly to another eligible plan or to an IRA. Under this option, the 20% mandatory withholding does not apply.
http://www.irs.gov/taxtopics/tc413.html


Trustee-to-Trustee Transfer
A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Because there is no distribution to you, the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers.
http://www.irs.gov/publications/p590/ch01.html#d0e3521
Linkat
 
  1  
Reply Wed 22 Oct, 2008 03:22 pm
@TTH,
See my quote from guidelines from my company - seeing they have been in the business for quite a long time and is one of the largest, I would assume they are correct - you need to have the check written to you and the IRA company. If it is only written to you then, yes it is a cash withdrawal and as TTH says you will need to make up the difference to roll it over. If it is written to you and the company, then no the full amount is paid and rolled into the IRA.

I did this also when I changed companies and voila I was not charged one penny - I simply signed the check and submitted it along with the paper work.
0 Replies
 
Linkat
 
  1  
Reply Wed 22 Oct, 2008 03:30 pm
@TTH,
It states right in the tax code that this is not taxable...

" rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it within 60 days to another eligible retirement plan. This transaction is not taxable but it is reportable on your Federal Tax Return."

This part you are referring to in the tax code "....You can choose to have your employer transfer a distribution directly to another eligible plan or to an IRA. Under this option, the 20% mandatory withholding does not apply. " Is what I am referring to when you have the check written to you and the IRA - as I said the advisor will give precise instructions on how to have the check written to accomodate this - in other words the current employer will address the check to you and the IRA and therefore it is viewed as a tranfers to the IRA and not a direct transfer to the individual.

This is the way I've accomplished this in the past and it has worked quite smoothly.
0 Replies
 
TTH
 
  1  
Reply Wed 22 Oct, 2008 03:58 pm
@Linkat,
I think we are just talking semantics here and I understand what you are saying about how your company handles the transaction.

btw I like how you worded this:
Linkat wrote:

That's also why I always advise people to seek out an experienced advisor - you really need advice based on your personal situation - you can't give complete advice in this sort of forum, just this is what is best in most situations.
Linkat
 
  2  
Reply Thu 23 Oct, 2008 11:25 am
@TTH,
Most likely we were saying the same thing - just using different wording and along those lines - make it clear you do not want any taxes taken out so the bozos transfering/making the check out do it correctly. If they happen to write it out strictly to you, you will pay taxes.
0 Replies
 
 

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