[magnum]

Does anyone know the penalties for depositing a 401k rollover check into my personal checking account that I was suppose to give to my new 401k company? Will my previous 401k company track where the check is deposited? Thanks.

[ebaines]

You will owe taxes on the amount of the payment plus a 10% penalty. Your old 401(k) investment firm really doesn't care where the check was deposited. Since the check was made out to you and not directly to the new 401(k) investment company, at the end of the year they will send you a form 1099-R, identifying that they sent you this money. A copy of the 1099-R goes to the IRS, so that they know about it. You will then have to include the distribution as income on your tax return next year. As part of the calculation of the taxes owed, you will have to pay taxes on the full amount of the distribution, plus 10% penalty, unless you can document to the IRS that you rolled the amount into a rollover IRA or your new 401(k). I believe to avoid the taxes and penalty you have 30 days max from the time they sent the check out to the time it is deposited with the new 401(k).

When moving money to a new 401(k) or rollover IRA from an old 401(k) it is always much, much better to have the investment firm that is receiving the rollover handle the transfer, as that way you avoid the complications of all this.

[ScottGem]

If you receive a distribution from a 401K plan, you MUST roll it over into a successor plan within 60 days. If you do not do this, it will be considered a premature distribution of the plan. This means it will be subject to a 10% penalty and the amount will be included in your taxable income for the year. You will then be subject to taxes on that income. The effect of the distribution could increase your tax bracket. Making the tax bite even greater.