Do I have to pay tax on my IRA rollover?
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An IRA rollover occurs when you take a distribution of cash or other assets from one
qualified employer retirement plan and contribute all or part of it within 60 days to
another qualified retirement plan, usually and IRA. The IRA rollover transaction is not taxable but it is
reportable on your tax return.
You can roll over most distributions except:
 | The non taxable part of a distribution, such as your after tax contributions to a
retirement plan, |
| A required minimum distribution; or |
| A distribution that is one of a series of payments based on life expectancy or paid over
a period of ten years or more. |
Any taxable amount that is not rolled
over into an IRA must be included as taxable income in the
tax year you
receive it and reported on your tax return.
If the taxable distribution is paid to you, you have 60 days to roll it over
into an IRA from the date you
receive it. This 60-day IRA rollover period is extended for the period during which the
taxable distribution is
in a frozen deposit in a financial institution. Any taxable distribution paid to you is
subject to a mandatory withholding tax of 20%, even if you intend to later roll it
over into an IRA. If
you do later roll it over into an IRA, and want to defer tax on the entire taxable portion, you will
have to add funds from other sources to the IRA rollover equal to the amount withheld for
tax. You can choose to have
your employer transfer a distribution directly to another eligible plan or to an IRA.
Under this option, taxes are not withheld.
If you are under age 59˝ at the time of the distribution, any taxable portion not
rolled over into an IRA may be subject to a 10% additional tax on early distributions.
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Related tax
information about IRA rollovers |
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What about IRAs?
What are Roth IRAs?
What are SIMPLE IRAs?
Income Related Questions and Answers |
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IRS publications about IRA rollovers:
For further tax information about an IRA rollover see
IRS Publication 575, Pension and
Annuity Income. For further information about IRAs refer to Tax
Topic
451, IRAs, or
IRS Publication
590, Individual Retirement Arrangements (IRAs). For
information on the Direct Rollover Option, refer to Chapter 11 of
IRS Publication 17, Your Federal
Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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