401k indirect rollover
I have a new client who is 74 just retired who brought in a check that she received from her 401k, in which the 20% was withheld. We are looking to roll the remaining into a IRA since her distribution was 61k and the rollover into her new IRA is 49k will the difference be considered a distribution for RMD purposes. We are not going to be making up the 20% that was withheld. thanks
Permalink Submitted by Alan - IRA critic on Wed, 2015-07-15 17:16
Yes, if the plan had not distributed the RMD separately before the rollover, the withheld amount will be applied to the RMD amount for the plan. She would report 61k on line 16a of Form 1040 and 12k on 16b with “rollover” shown next to 16b. She has the option to add other cash to the rollover up to the amount that the 12k exceeds the RMD amount. That would reduce the 12k of taxable income on line 16b and increase her IRA balance. In all cases, she has 60 days from the date of receipt of the check to complete the IRA rollover.