Rollover from 3 different 403bs Taxes Withheld

Submitted by James White on Mon, 2022-12-12 16:40

A client completed the paperwork to Roll three old 403b’s (all with TIAA) into her Rollover IRA. All three checks were sent directly to the custodian, however, 20% tax was withheld from each of the checks. Can she use outside funds to deposit the tax withheld within the 60 days, of course?

Thanks!



Submitted by Alan - IRA critic on Mon, 2022-12-12 18:32

  • Dirct rollover checks should not have withholding.  The client can replace the amount withheld to complete these rollovers, and then receive a tax refund for amounts paid in to the IRS that exceed the tax liability. Client is fortunate that they have the funds available to complete the rollovers, as many taxpayers would not. This seems like an odd error for TIIA to make. Are you sure that client’s statement is correct, or that 403b RMDs were not included in the distribution?
  • If this occurred as described, client can write a single check for the total amount withheld and advise the IRA custodian that it’s a rollover contribution. 


Submitted by James White on Mon, 2022-12-12 19:46

Thanks. The client is age 40 and did not check the correct box on the TIAA rollover form and sent it in before I could review it. It’s not TIAAs fault.



Submitted by Alan - IRA critic on Mon, 2022-12-12 22:59

That’s still odd. If the client requested a distribution in error instead of a direct rollover, the checks net of 20% withholding would have been payable to client and normally sent to client with a 1099R coded 1 in January. If sent directly to the IRA custodian I wonder how client authorized rollover contributions to the IRA, endorsed the checks, etc.



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