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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7527
Experience:  15years with H & R Block. Divisional leader, Instructor
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I withdrew my GE Pension thinking I would need the money immediately,

Resolved Question:

I withdrew my GE Pension thinking I would need the money immediately, but it turns out that I do not. GE says I can't put it back into their pension plan. What can I do with the money now to avoid taxes and penalties? Can I put it into an IRA at a bank or investment firm?
Submitted: 3 years ago.
Category: Tax
Expert:  Robin D. replied 3 years ago.

Hello and thank you for using Just Answer.

You can put the money into a Traditional IRA as long as you also deposit the amount of any taxes that GE withheld when you received the distribution. This would be called a Rollover and you have 60 days to complete the transaction from the date of your distribution from GE.

If you do not complete the rollover within the time allowed or received a waiver or extension of the 60-day period from the IRS, the amount must be treated as ordinary income. You will also have the additional 10% penalty if you were under 59 1/2 at the time of distribution.

I sincerely XXXXX XXXXX information is helpful,

Customer: replied 3 years ago.
Specifically, the gross amount was $37,211.85. GE withheld $6,480.97 in Federal Taxes and 1,916.96 in GA State Taxes (for a total withholding of $8,397.93). The check I received was for the net balance of $28,813.92. Am I correctly reading your answer that I have to put the entire gross amount of $37,211.85 into an IRA for it to be considered a rollover? If I can't do that, meaning all I can now "rollover" is the $28,813.92, then what happens to the $8,397.93?
Expert:  Robin D. replied 3 years ago.

You will pay tax on the amount you do not deposit as well the 10% penalty. The entire amount ($37211.85) will be shown on your 1040 Line 16a but only the $8397.93 will be listed as taxable on 16b.

You will still get credit on the 1040 for the amount that was withheld for taxes. The federal and GA amounts will be shown on 1040 Line 61. You should receive a 1099R from GE with the distribution and withholding amounts.

Customer: replied 3 years ago.
Aren't I then being double taxed since taxes were withheld for the entire amount and then I will be taxed on the "taxes that were withheld"...sorry for such a confusing question.
Expert:  Robin D. replied 3 years ago.
No, you will be showing the amount that was withheld on your tax return so in reality you were not taxed on it. It was withheld but not taxed. GE withheld the money based on the total amount but you will only be taxed on the portion that you do not rollover to a Traditional IRA.
Customer: replied 3 years ago.
This response is predicated on the fact that I don't have the cash to make-up the difference between the gross amount and the net I received. So, in effect, the net "downside" to me is the 10% penalty on the $8,397 that was withheld by GE plus my tax rate multiplied by the $8,397? By my calculations ($8,397*10%)+($8,397*28%) = $840 + $2,351 = $3191 (roughly speaking this is the amount the mistake of withdrawing the pension is going to cost me?)
Expert:  Robin D. replied 3 years ago.

Whatever amount you do not deposit will be added to your regular income and taxed as ordinary. On top of having the amount added to your income you will also be subject to a 10% penalty and that will be added to your tax liability.

It is a pretty much given that you will have a penalty in the amount of $840 and if your tax rate is 28% as you suggested then yes the $2351 will be ordinary income tax.

 

Customer: replied 3 years ago.
Robin:
You have been tremendously helpful and extremely patient with my questions. Based on this experience with you and justanswer.com I am highly satisfied with the service.

I'll be "Accepting" your answer now. Thank you again for all your help.
Expert:  Robin D. replied 3 years ago.
Thank you, XXXXX XXXXX the answer could have been different.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7527
Experience: 15years with H & R Block. Divisional leader, Instructor
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