USA 401K roll over


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My nephew lost his job in March 2019, the company closed. Therefore, he received no severance. He collected Unemployment for 6 mos. He still did not get a job after the 6 mos. So, he took out some money from his IRA. After he lost the job he rolled over his 401K into an IRA. Anyhow, less than a month after he took out money from the IRA, he got a job. He is 47 yrs old. They are telling him, he basically is screwed and will have to pay taxes on the money he took from IRA and can't just roll over the money he took out into a 401K at the new job without paying tax. They told him to just hold on to the money he took from IRA. So, if he took out 35K, they put 29K into his back account and come tax time he will have issues. I thought you can roll over money if you take out within 60 days?
 
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Drmdcpa

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The information from others was incorrect. Your understanding is correct. He has 60 days to put that money back into the IRA. This would be considered an indirect rollover. You can do one once every twelve months. After which, if it makes sense and his new employer plan allows it, he can then do a direct rollover of the IRA to the new employer's 401K. But this does not always make sense.
 
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Werner Reisacher

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You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA.Nov 12, 2010
Be careful that you are not confusing IRA with the company's 401K. The funds have to go back to the IRA if the new employer does not allow that the funds are added to their 401K plan. I do understand why employers have reasons to avoid transfers from other than 401K plans. So you must negotiate with the bank that holds the IRA. If these complications lead to your relative missing the deadline, he can apply to the IRS. There is a federal judgement on such a case that rules that missed 60 days deadlines caused by administrative issues that are beyond the control of the investor are not his responsibility and the tax is waived.
 

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