Aftertax Pension Payout
Late last year a women had been hospitalized with seizures during a time that her brother had pass away. She had just retired from a company. She and her husband were planning on moving to New Mexico to start their retirement. The husband had competed the pension form and sent it in for election. Unfortunately, she had signed off on electing the pension payout. During this period her husband passed away from COVID as they were settling in New Mexico. She received a check for the payout less 20% withholding as the check was made out to her.
We have initiated a request for reconsideration with the pension folks but have not heard back. Can she deposit the check in a traditional IRA and reclassify her distribution for a return of tax paid?
Permalink Submitted by Alan - IRA critic on Tue, 2021-02-09 19:08
What exactly does she want reconsidered? Was this distribution for 2020 (has 1099R now), or was it this year?
Permalink Submitted by John Panter on Tue, 2021-02-09 19:35
She would like to either get the check made out to a custodian as an IRA or get back the tax withheld and hold in a Traditional IRA account.
Permalink Submitted by John Panter on Tue, 2021-02-09 19:37
I believe, but I will check on that.
Permalink Submitted by Alan - IRA critic on Tue, 2021-02-09 20:07
If she did not request direct rollover in the first place, there is no chance the plan will change anything now. She has 60 days to do a spousal rollover to her own IRA, but unless she has other funds to replace the amount withheld it will only be a partial rollover, and the amount withheld will be taxable. If she thinks that the financial institution actually made an error by not doing a direct rollover, she might be able to get the 60 days extended using the following Rev Procedure, but would still have to come up with the replacement funds perhaps through a tax refund?
Microsoft Word – rp-20-46.docx (benefitslink.com)