NWR: Rolling over 401K into an IRA Tax questions

WeezyGirl2354 Posted: Mar 12, 2010 12:30 PM

NWR: Rolling over 401K into an IRA Tax questions

UGG I hate this stuff - I am horrible at this stuff!!!

I have to roll over my 401K into an IRA since my company basically tanked and laid me off.

I have to choose if I want federal and state income tax withheld from it - i guess when it is rolled over.

Does anyone have any effin clue what would be the best thing to do here? I know every situation is different but any insight would be really appreciated!!!

TIA!!!!

Pacie Posted: Mar 12, 2010 12:41 PM

Re: NWR: Rolling over 401K into an IRA Tax questions

I'm an HR person, as long as you are rolling your 401K over into a traditional IRA you dont need anything to be withheld. The only time you would need taxes to be withheld is if you are taking it as a distribution (gonna run with the cash) but as long as you are moving it from one retirement account to another its not necessary.

AwaitingAugust Posted: Mar 12, 2010 12:44 PM

Re: NWR: Rolling over 401K into an IRA Tax questions

i don't know anything about finances BUT if you can, i'd prob not withhold anything ... that's extra money in your IRA (which grows pretty fast)

WeezyGirl2354 Posted: Mar 12, 2010 12:46 PM

Re: NWR: Rolling over 401K into an IRA Tax questions

Posted by Pacie

I'm an HR person, as long as you are rolling your 401K over into a traditional IRA you dont need anything to be withheld. The only time you would need taxes to be withheld is if you are taking it as a distribution (gonna run with the cash) but as long as you are moving it from one retirement account to another its not necessary.

Ok so I will check off not to withhold for both but then it asks the withholding rate and it must be at least 10% - so should i just go w/ the 10%???

THANKS

Pacie Posted: Mar 12, 2010 12:59 PM

Re: NWR: Rolling over 401K into an IRA Tax questions

It sounds like you don't have the right paperwork. When a 401K closes you have 3 options:

1. lump sum cash distribution
2. an eligible rollover (which is what it sounds like you want to do)
3. a combination of a lump sum cash distribution and an eligible rollover.

From what I'm reading it sounds like you are completing a lump sum cash distribution form and that 10% percent that they are requiring you to withhold is a penalty for being under 59 1/2 and taking out the money. Try calling the 401K provider - it should be like Fidelity or some financial institution like that. And explain that you want to roll over your 401k into an IRA and see if they can send you the correct form.