Roth 401K question

I'm wondering about this check I have from a company sponsored retirement plan. It's a Roth 401K and I'm NOT 59 1/2 years old.

The company I work for was sold to a company that doesn't offer a Roth 401K. I did a roll over to the new company thinking both the Roth and the 401K would be rolled over into the new companies plan.

The 401K rolled over correctly but since they don't have a Roth plan I have this check. It shows some federal tax taken out but not the size of an early withdrawal. The Roth check is in my name only (not FBO your name here).

Just wondering how this is going to look at tax time. Is this a special case or am I going to get a 1099 for it as income or something?

Quote:

---

Originally Posted by pmer

I'm wondering about this check I have from a company sponsored retirement plan. It's a Roth 401K and I'm NOT 59 1/2 years old.

The company I work for was sold to a company that doesn't offer a Roth 401K. I did a roll over to the new company thinking both the Roth and the 401K would be rolled over into the new companies plan.

The 401K rolled over correctly but since they don't have a Roth plan I have this check. It shows some federal tax taken out but not the size of an early withdrawal. The Roth check is in my name only (not FBO your name here).

Just wondering how this is going to look at tax time. Is this a special case or am I going to get a 1099 for it as income or something?

---

Roth has already had taxes taken out BUT since you aren't 59 1/2 there *may* be a penalty for early withdrawal. If you are within time constraints you *may* be able to put it in a bank, investment house (Ed Jones etc) Roth IRA. Consult a tax pro asap and then talk to your bank or investment house of your choice. If you can get away with putting it into another Roth that would be good. I hate the IRS and don't want to give them one more dime to squander than they already do.... by the way ---- "The" + "IRS" combined = "THEIRS".........

Hope this helped.

Art

P.S. - you WILL get a 1099-R which will have a code on it to be reported, if that is incorrect you'll need to get it changed or argue with IRS for a year or so...

Art

You pay on the gain from a Roth, not principal. Should have been given the option to roll it over into another Roth, not run by the company.

Take Tazman's suggestion and get 2nd and 3d opinions from investment people to make sure you're getting good information.

I would contact Vanguard,Fidelity etc. and talk to them. If you wanted to keep your Roth funded (as indicated by rolling it over) open a self directed Roth with one of the investment houses. I would NOT cash the check until I was sure of any or all ramifications. I believe you have a certain time frame to make any roll over. Until you cash that check you have not taken possession of that money! I'm pretty sure if you roll that into another Roth you are entitled to get the withholding back and put into the new Roth.

Quote:

---

Originally Posted by popper

You pay on the gain from a Roth, not principal. Should have been given the option to roll it over into another Roth, not run by the company.

---

https://www.rothira.com/what-is-a-roth-ira

You don't pay on the gain with a Roth.
What Is a Roth IRA?

A Roth IRA is a special retirement account that you fund with post-tax income (you can’t deduct your contributions on your income taxes). Once you have done this, all future withdrawals that follow Roth IRA regulations are tax free.

Here's what I know so far after I called the old investment company.

So far it looks like I paid 20% on the earnings and not the whole amount. If I cash it I "might" have to pay an additional 10% because I'm less than 59 1/2 years old. From here I can do a direct rollover or a indirect rollover. The indirect rollover keeps in mind the fact I paid the 20% tax and can get that taken off taxes paid next year. So I'll try for the indirect one. The direct rollover has me losing that 20% as in gone. So I guess I have/had the option, just have to do more on my part to make it work.

Had to be this way because the new company didn't have a spot for Roth 401K plans.

you really need to have a financial guy anyways to set you up into your non work retirement investments, and since it sorta looks like a mess, id ask your tax guy too.

Roll your Roth 401-k from the company to an individual Roth Ira. Make sure you do it within 60 days! You call as suggested Vanguard, tell them your situation. They supply the form you sign and initiate the transfer. Make sure they understand it is a Roth and DO NOT TAKE A CHECK from the old company. (I used to be ones of those financial guys for 23 yrs.)

It does not sound to me like your old investment co. is doing you any favors. There is no reason why you should have to suffer any losses because of the company change. I'm pretty sure Hogtamer is giving good advice. Call Vanguard( great company)DO NOT CASH THAT CHECK. The old investment co. should transfer the money (all of it, no deductions!) to a Roth at Vanguard. Fidelity will do the same. No reason for you to take any financial hit on this deal at all. Good luck.

If it a Roth Ira, you used post tax money and you Never pay more tax on Any more of the money, gain or otherwise. But you received a check, and the federal penalty and state penalty was withheld. They should have rolled into a Roth not sent you a check, but it is probably too late to reverse. You've lost the 20 percent but you should open another Roth and put remainder there. But first contact good financial adviser. They may be able to salvage the 20 percent....


Never get a check, never touch the money until you want it......

The economy is booming get it back in ASAP.

Some of the advice above is good and some is completely wrong.

You can roll the entire amount into another Roth without paying any penalty as long as you do it within 60 days. However, the catch is that you need to also roll over the amount of the 20% that they withheld with additional funds. In other words, if your IRA was 10,000, they withheld 2k and gave you 8k. You need to rollover the 8k and another 2k from your savings or some type of loan for a total rollover of 10k. When you file your tax return, the 2k they withheld is additional taxes paid and your refund will be 2k larger than it would have been.

If you don’t rollover the 2k, it will be considered a distribution and you will owe taxes and penalties on it. However, since the IRS already has the money, you will get a portion of the 2k back as a tax refund.

Here’s an example from the IRS web site: https://www.irs.gov/retirement-plans...-distributions

Quote:

---

Originally Posted by garandsrus

Some of the advice above is good and some is completely wrong.

You can roll the entire amount into another Roth without paying any penalty as long as you do it within 60 days. However, the catch is that you need to also roll over the amount of the 20% that they withheld with additional funds. In other words, if your IRA was 10,000, they withheld 2k and gave you 8k. You need to rollover the 8k and another 2k from your savings or some type of loan for a total rollover of 10k. When you file your tax return, the 2k they withheld is additional taxes paid and your refund will be 2k larger than it would have been.

If you don’t rollover the 2k, it will be considered a distribution and you will owe taxes and penalties on it. However, since the IRS already has the money, you will get a portion of the 2k back as a tax refund.

Here’s an example from the IRS web site: https://www.irs.gov/retirement-plans...-distributions

---

^^^^^is the right thing to do^^^^