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Federal Withholding Tax


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My employer's plan is terminating and I'm taking a small cash distribution and rolling over the rest to an IRA.   My employer will NOT take federal withholding taxes from the cash portion.    Isn't this required when taking a distribution?   is there any repercussion for not taking the withholding?  I guess I could up my deduction each pay to make up for it so I don't owe it all at the end of the year.    

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Are you over age 72?

How small is small - less than $200?

There is no penalty on you if the plan fails to withhold, but it jeopardizes the plan. Worst case, the plan could get disqualified and your contributions would no longer be eligible for rollover. That's an extreme result though, and rarely used. Most likely, as long as all taxes are eventually paid, the IRS will not bother anyone about it.

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