401k to Roth
In 2012, a client rolled over part of their pre-tax 401k dollars into a Roth. They completed the paperwork in such a way that the 401k provider did not withhold taxes. Rather, it was all rolled directly to the Roth? Did the 401k provider do this incorrectly? If so, is there any way to correct it?
Permalink Submitted by Alan - IRA critic on Tue, 2013-04-23 18:55
The provider was correct because according to Notice 2008-30 Q 6, there is NO mandatory 20% withholding for rollovers to a Roth IRA even though the rollover will be taxable. However, if the employee requests withholding, the plan can comply with the request. Had there been withholding, then the entire distribution would not have been rolled to the Roth since the IRS receives whatever % is withheld. The employee will owe taxes on the rollover with their 2012 return.http://www.irs.gov/pub/irs-drop/n-08-30.pdf