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Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience:  Nine years individual income tax preparation and consulting
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My had to quit work in February 2009. She was 58 years old.

Resolved Question:

My had to quit work in February 2009. She was 58 years old. Upon leaving employment we consolidated various 401k and 403b plans into an IRA with Scottrade. Later that same year, we had to make a withdrawal. I understand that if the cash withdrawal had been made directly from the 401k/403s, then the 10% penalty would not apply. Rules say that this waiver of the penalty does not apply to IRAs. However, since all of this took place within the same year, can it be treated as a 401k/403b withdrawal to avoid the penalty?

Thank you.
Submitted: 7 years ago.
Category: Tax
Expert:  Jacy replied 7 years ago.
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Jacy :


Jacy :

This depends on how the accounts were opened. If the funds were rolled directly from the 401k/403b plans, I think you are stuck with the penalty. If the any of the distributions were not direct, your IRA custodian may be able to recharacterize the rollover contribution from IRA to Roth IRA. This would make that portion of the contribution taxable at the time of distribution of the qualified plan, and thus not subject to the 10% penalty.

Jacy :

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Expert:  Jacy replied 7 years ago.

Please excuse the multiple response. The chat function seemed to have stalled.