IRA Rollover

Archive for November, 2005

Question: 401k withdrawal which tax year?

I have been trying to sought a problem and have some new information.In 2002 my spouse rolled over 40,000 into a Ira .(job change )2003 shows a withdrawal of 20,000 then another 15,000 a few months later . when filing federal tax return all this 35,000 should be on our 2003 return correct even though the transaction was requested for a 20 000 withdrawal in dec 2002…………the funds were not received until 2003.Should anything at all be listed on our 2002 tax return ie that funds were rolled over and that a withdrawal was pending which year tax would this go on ?THe statement with the rollover shows a end of year balance of 40,000.Would having a child in 2003 which we did help offset some of the taxes that were due on this 35,000 ?

Answer: yes it’s taxable in 2003…when you take the withdrawal doesn’t matter (nor does it matter when you receive it) it’s when the check is cut and put in the mail that determines what year it’s taxable in. The 1099-R tells you when it’s taxable and sounds like it all occurred in 2003.

The 2002 rollover is not taxable though it should have been disclosed on line 16a on the 1040. line 16b would be zero as the rollover is not taxable.

the child helps with the tax issue but only a little bit. Having an extra child gives you about $700 extra dollars off your taxes. But, a 35,000 distribution would have had a tax bill of about 7,000. The $700 is hardly a drop in the bucket for this.