Company Pension Distribution
We had a prospect recently come into the office that took a lump sum distribution from her Pension Plan. The check was made out to her plus they withheld 20% for taxes. Can she roll over the full distribution amount (or part) to her IRA within 60 days to avoid the taxes? I know she could do this with an IRA distribution but does the same rules apply to a Pension distribution?
Permalink Submitted by Alan Spross on Thu, 2012-09-20 22:44
Yes, the same option applies. The taxpayer can “replace” the withheld amount and roll it into a TIRA account within 60 days of receipt. The withheld amount would then be credited to their tax liability and possibly refunded if overall tax payments are adequate for the year.
This rollover will also eliminate an early withdrawal penalty on the withheld amount, if taxpayer is subject to the penalty.