IRA Rollover

An IRA rollover happens when you take a distribution of cash or other assets from one qualified employer retirement plan and contribute all or part of it within 60 days to another qualified retirement plan, usually and IRA. The IRA rollover transaction is not taxable but it is can be reported on your tax return. You can roll over most distributions except the non taxable part of a distribution. You can also not rollover the cash if it is a required minimum distribution or it is a distribution that is one of a series of payments based on life expectancy or paid over a period of ten years or more. Any taxable amount that is not rolled over into an IRA must surely be included as taxable income in the tax year you receive it and reported on your tax return.

If the taxable distribution is paid to a person he has 60 days to roll it over into an IRA from the date he receives it. This 60-day IRA rollover period is extended for the period during which the taxable distribution is in a frozen deposit in some financial institution. Any taxable distribution paid to the person is subject to a mandatory withholding tax of 20%, even if you intend to later roll it over into an IRA. If you do later roll it over into an IRA, and want to postpone or prolong tax on the entire taxable portion, you will have to add funds from other sources to the IRA rollover equal to the amount withheld for tax. You can also choose to have your employer transfer a distribution directly to another eligible plan or to an IRA. Under this option, taxes are not withheld.