401k distribution, then IRA deposit
Client’s employer was sold. They were told to either roll their 401k to the new company, or roll it out. Since my client didn’t intend to stay with the new company, he asked for a distribution, intending to roll it to an IRA.
When he told me about it, I suggested he stop the process,and let’d do a direct rollover instead, no withholding to deal with.
Too late, they already cut the check.
he hasn’t received the check yet, hasn’t cashed it. Can we ask them to redeposit and do it correctly this time? he doesn’t have the 20% to add back in.
Permalink Submitted by Alan - IRA critic on Mon, 2013-06-03 16:30
He can ask them, but they will probably refuse. If so, considering the tax and penalty on the withheld amount, client should replace as much of the withholding as he can. He has up to 60 days from receipt of the check to do this. He can also reduce any other withholding or estimates he is paying to offset the mandatory 20% withhholding.