IRA Rollover

Archive for May, 2006

Question: How can you get withholding back from IRA rollover?

My son’s friend had a retirement plan at work, (a SEP, I think) and left his job. The AG Edwards broker’s assistant called and told him he had to take the money if he wasn’t going to add to it anymore. The kid didn’t know his options and got a check, minus 20% withholding and another 10% for the early withdraw penalty. He then endorsed the checks and put them into his regular IRA as a rollover. I know the rollover isn’t taxable, but what about the 30% that was sent to the IRS? American Funds said it’s too late to get it back from them. Please help. Thanks.

Answer: When he does his tax return, he will calculate any actual tax due. He’ll show the withholding taken from the IRA added to the withholding from any jobs that he had, and if more was withheld than he owes, he’ll get it back as a refund from the IRS.

The only problem here is that if he just deposited the checks into a rollover IRA, then he only rolled over 70% of what he withdrew, so he’ll owe taxes and the 10% penalty on the 30% he didn’t roll over. The only way to avoid that would have been to put in enough money to the rollover IRA to cover that.

Rolling SEP IRA into 401K – Realty Academy – Chris Bird.mov