I left the May Company in April 06 due to a merger with Macy's. I couldn't decide at the time how best to move my profit sharing and retirement monies. Now I feel I'm going to be stuck paying a extremely high tax penalty... over $13,000. Is there a way to avoid paying 07 taxes on this money? Is it too late to put the money in some kind of investment to avoid the penalty?
2007-05-01 04:10:09 · 6 answers · asked by byruss587 1 in Business & Finance ➔ Taxes ➔ United States
You will pay tax on the entire amount as ordinary income plus a penalty for withdrawing the money early of 10% of the distribution amount. If you have not yet filed your 2006 return or an extension with 90% of the tax due you also are subject to fines and penalty for filing late. One year after the withdrawal there is not much you can do but pay.
2007-05-01 04:37:18 · answer #1 · answered by ? 6 · 0⤊ 4⤋
If it's still in the former employer's plan, then you could still roll it over into a rollover IRA. But if you actually took the money, and didn't put it into a rollover IRA in the specified time, then you're stuck paying both the taxes, AND also the 10% penalty if you're under 59-1/2.
If you took the money in April 06 when you left, you're not only way beyond the deadline for a rollover, you should have paid the taxes with your 2006 return. You should have gotten a 1099-R showing the withdrawal, from whoever paid you the money. If you got that and didn't report it, file an amended 2006 return as soon as possible.
2007-05-01 10:15:08 · answer #2 · answered by Judy 7 · 2⤊ 0⤋
You don't say you actually took your money out of the previous employers retirement account,, but if you did, you had 2 months to get it rolled over into a new account to avoid any tax or penalty.
If you haven't taken the money out yet,, no harm,, just move it to another retirement account. As long as it is still in the original account,, no taxable event has happened.
If you took the money out in 2006 you would have received a 1099 and would have shown the amount on your 2006 tax return.
2007-05-01 04:34:08 · answer #3 · answered by Jo Blo 6 · 3⤊ 0⤋
It sounds like you haven't withdrawn the funds yet. If that is the case, find a good investment company where you can work with a broker. He/she will be able to find the right vehicle for your retirement funds, help you move them without causing a taxable event & make sure you're putting the money into the type of investment that you are comfortable with.
2007-05-01 09:31:21 · answer #4 · answered by Rene F 2 · 1⤊ 0⤋
If you left the money alone where it was, you're OK. If you cashed it, then you'll be stuck paying the early withdrawal penalty if you don't put it in something fast. You can just stick it in a 3-month IRA CD at your local bank until you know what to do. Truthfully, I like the dependable interest rather than risky stock market with all the fees.
2007-05-01 04:37:15 · answer #5 · answered by Just Mee 2 · 0⤊ 1⤋
You only have 60 days, if I remember right. You are about to pay a whole lot of taxes and penalties.
And if you didn't get an extension on filing, you can add more to them.
2007-05-01 04:14:24 · answer #6 · answered by Steve H 5 · 1⤊ 2⤋