converting a 401k to a tira
My son lost his job and had a 401k acct. The only way they will give him his money is to send him a check . What documentation does he have to have so he will not have to pay taxes on this amount. he is going to put the amount into a tira. thanks
Permalink Submitted by mk foss on Wed, 2009-03-25 17:34
There are two ways this can be handled. He can ask that the check be made out to the custodian of a new IRA account. He should open the account first to get the correct information.
The other way is to have the check made out to him and take it to the custodian to deposit in a new IRA account. The difficulty with this approach is that 20% federal taxes will be withheld. There are two ways to deal with that. One is to “make-up” the withholding from another source of funds so that the entire distribution is rolled over – and not taxable. The other choice is to ignore it, pay tax on the 20% on his 2009 return. In either case, he will have the 20% federal tax as a credit against his 2009 taxes owed.