do indiect rollover with RMD in 2009
there is a pension buy out that forced an individual out and issued him 2 checks . one for his RMD with fed taxes withheld and one which is a bigger sum and both are made payable to the client. client wants to do an indirect rollover with both. can he do that with his RMD if he makes up for the fed taxes withheld since RMDs are not required in 2009? pension plan even though IRS has waived the RMDs for 2009 they said they have to go with the pension plan procedures and they did process the RMD before issueing the balance of the participant’s acct to him directly. any advise?
Permalink Submitted by Alan Spross on Wed, 2009-08-12 21:21
Yes, both can be indirectly rolled over within 60 days of check receipt. The 20% withholding should not have been taken from the RMD portion as the IRS has ruled that even though this amount is actually NOT an RMD in 2009 and therefore rollover eligible, the mandatory 20% withholding does not apply. The 20% withholding DOES apply to the portion that was not included in the RMD. But no damage done if client can fund the full rollover by coming up with the amount that was withheld for taxes.
Permalink Submitted by Shahpar Naghshineh on Thu, 2009-08-13 14:26
what if she does not have the 20% that was withheld to make the distribution whole for the indirect rollover. could she do the indirect 60 day rollover with what she got after taxes withheld?
Permalink Submitted by Jose Morales on Thu, 2009-08-13 15:37
Yes, she can rollover just the amount received without making up the withheld portion. She should understand that the withheld portion, not rolled over, will be treated as income and subject to income tax. If she can pull together funds to make up the withheld portion within 60 days she could open an IRA in order to avoid the tax consequences.