401(k) Distribution
I have a tax client who is in the final stages of incurable leukemia. In 2009, he liquidated his 401(k) with his then current employer and paid the tax on the distribution. As might be expected, he has a large tax liability to settle with the government. Question: Is there any way to reverse his prior year 401(k) distribution and roll into an IRA, perhaps on the grounds of a medical reason?
Permalink Submitted by Alan Spross on Thu, 2010-03-11 20:19
It would be an uphill fight, but perhaps possible.
What did he do with the funds between the distribution and now? Was this processed as a hardship distribution? What was the reason he took the distribution and how long ago was it? Did he pay large medical bills in 2009? By paying the tax I assume you refer to 20% withholding?
Permalink Submitted by Bruce Steiner on Sun, 2010-03-14 00:29
The IRS has discretion to waive the 60-day deadline under Section 402(c)(3)(B) “where the failure to waive such requirement would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual ….”
I’ve obtained waivers in about a half dozen cases.
Can you show that he intended to roll it over but was prevented from doing so by reason of his illness?
Bruce Steiner, attorney
NYC
also admitted in NJ and FL