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Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 6179
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I TRANSFERED ALL OF MY 401K FROM THE COMPANY I RETIRED FROM

Customer Question

I TRANSFERED ALL OF MY 401K FROM THE COMPANY I RETIRED FROM AT AGE 62, INTO A INVESTMENT COMPANY AND 8 MONTHS IT CLOSED THAT ACCOUNT AT THE INVESTMENT COMPANY AND DID A DIRECT TRANSFER INTO A CREDIT UNION AND PUT INTO A ROTH IRA. I WAS TOLD I COULD DO THAT AS LONG AS IT WAS DONE WITHIN A ONE YEAR TIME TABLE AND WOULD NOT HAVE TO PAY TAXES UNTIL 701/2, WHICH IT WAS. I DID NOT PAY TAXES ON EITHER TRANSFER DUE NOT REQUIRED BY LAW IS THAT CORRECT? IT IS IN A ROTH IRA ACCOUNT, I THOUGHT THIS WAS NOT TAXABLE, BUT YET I KNOW THIS IS ALL FROM MY ORIGINAL 401K WHICH BY LAW STATES I MUST PAY TAXES ON AT AGE 70 1/2.
IS THIS CORRECT INFORMATION I RECIEVED FROM THE CREDIT UNION CORRECT, JUST WAIT AGE 70 1/2 AND THEN DO THE REQUIRED DISTRIBUTION AMOUNT AND PAY TAXES THEN?
Submitted: 9 months ago.
Category: Finance
Expert:  Stephen G. replied 9 months ago.

What kind of an account did you transfer your 401K money to in the "Investment Company".

You had 60 days to rollover the 401K to an IRA.

If that wasn't done, or it didn't go into a different qualified plan within the 60 days that was a taxable event for the full amount of the 401K distribution.

Unless the Investment Company had your money in an IRA account, you were not eligible to roll anything into a Roth IRA. Even if the money was in an IRA, putting it into a Roth within 60 days of the original withdrawal would have triggered the tax as only whenever money is put into a Roth it is with after-tax dollars.

If you have money still in a Roth, you are going to have to take it out as your penalties will continue to mount if you don't.

All these companies should have been advising you whether or not you could make these transfers and what the tax implications are.

You should have received a 1099-R on your original 401(k) distribution which indicated it was fully taxable.

I'm afraid you are going to have to see a local CPA to straighten out your tax returns and draft abatement requests for the penalty assessments that are sure to follow if you haven't receive them already.

The only thing the 1 year timetable pertains to is that you can make only 1 401K or IRA rollover that you handle yourself within the 60 days once every year. Trustee to Trustee transfers don't count in the once a year limitation.

So, at this point the question becomes what kind of account was the money in at the Investment Company?

Customer: replied 9 months ago.
MY 401K WAS ROLLED OVER INTO A IRA ACOUNT WITH THE INVESTMENT COMPANY
Customer: replied 9 months ago.
LATER I DID A DIRECT TRANSFER OF THE IRA ACCOUNT AT THE INVESTMENT COMPANY TO A CREDIT UNION
Customer: replied 9 months ago.
IT WAS PUT INTO A ROTH IRA ACCOUNT AT THE CREDIT UNION ONLY 8 MONTHS AFTER IT WAS AT THE INVESTMENT COMPANY
Expert:  Stephen G. replied 9 months ago.

Well, you owe tax on the transfer to the Roth IRA. Once you have the money in the Roth you can take out your own contributions tax free & after 5 years any earning from day 1 in the Roth would also be tax free.

Once you took the money out of the IRA at the investment company and reinvested it in the Roth, you triggered the tax on the entire amount you put in the Roth.

You should have received a 1099-R from the Investment Co, but either way it's taxable.

Expert:  Stephen G. replied 9 months ago.

Just checking in.

I see that you have had a chance to review my response; do you have any follow-up questions?

If not, please remember to rate my response as that is the only way we receive credit for our work.

Thanks very much,

Steve G.