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    beubanks's Avatar
    beubanks Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Sep 10, 2008, 05:53 PM
    401K Dispersement
    I just left a company where I had a 401K plan. I wanted to roll all the money over to another 401K plan but I messed up.

    I had them cut me a personal check and they took out Federal Taxes. I want to put the remaining balance in my Schwab 401K plan which is before the 60 day requirement date I need to put this money in another 401K account without being taxed.

    Since the federal taxes have already been taken out of this money can I now write those taxes off against my return I will file next year? I need help on knowing how to handle this situation?
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #2

    Sep 10, 2008, 06:11 PM
    You must roll over the entire withdrawal including the taxes withheld within 60 days.
    Read Your U.S. Tax Return: Elective Deferrals 401(k) Plans
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #3

    Sep 11, 2008, 10:43 AM
    I assume you mean you put the money into your Schwab IRA.

    If you rolled the money into either an IRA or another 401K, you did FINE if you completed the transaction prior to the 60 day anniversary of the date the money was withdrawn from the first 401K.

    However, in order to avoid ALL taxes, you must take the federal taxes they withheld from OTHER sources (your bank account, a loan, whatever) and roll that money into the IRA/401K as well. Otherwise, the withheld taxes will be considered to be a EARLY WITHDRAWAL that is subject to state and federal income taxes PLUS the 10% Early Withdrawal Penalty.

    Once this is done, you will document this fact on your 2008 federal tax return. You will also claim the 20% withheld taxes on your 2008 federal tax refund.
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