A rollover occurs when you withdraw cash or other assets from one eligible
retirement plan and contribute all or part of it within 60 days to another
eligible retirement plan. This transaction is not taxable but it is reportable
on your Federal Tax Return. You can roll over most distributions except for:
The nontaxable part of a distribution, such as your after–tax contributions
to a retirement plan (in certain situations after— tax contributions
can be rolled over),
A distribution that is one of a series of payments based on your life
expectancy or the joint life expectancy of you and your beneficiary or paid
over a period of ten years or more,
A required minimum distribution, or
A hardship distribution.
Any taxable amount that is not rolled over must be included as income in
the year you receive it.
Except in cases of hardship, the distribution is paid to you. You have
60 days from the date you receive it to roll it over. Any taxable distribution
paid to you is subject to a mandatory withholding of 20%, even if you intend
to roll it over later. If you do roll it over, and want to defer tax on the
entire taxable portion, you will have to add funds from other sources equal
to the amount withheld. You can choose to have your employer transfer a distribution
directly to another eligible plan or to an IRA. Under this option, the 20%
mandatory wihholding does not apply.
If you are under age 59 1/2 at the time of the distribution, any taxable
portion not rolled over may be subject to a 10% additional tax on early distributions.
Certain distributions from a SIMPLE IRA will be subject to a 25% additional
tax.
For further information about rollovers and transfers, refer to Publication 575 .
