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Found 6 results

  1. A participant (in a 401(k) plan) has a foreign address (they moved out of the country, unclear as to whether this was before or after terminating service). We utilize state of residence (for tax withholding), but this is a first. When a distribution is processed, what tax withholding is necessary? Is the withdrawal subject to US federal taxes? Does the answer vary depending on the county?
  2. We are having a discussion in our office about how distributions are or should be processed. Just for simplicity take a termination distribution. Say that the participant has $10,000 and he's fully vested, to make it easy. He doesn't want a rollover, he wants a taxable distribution. The form he filled out calls for 20% federal withholding taxes and no state withholding taxes. The recordkeeper charges $100 to process the distribution, and our office charges $70. One of us thinks that the 20% federal withholding applies to the full $10,000. The participant has $8,000 after taxes, out of which he pays the fees, and ends up with $7,830 in his pocket. Another of us thinks that the fees come off the top, and the taxable distribution is $9,830. The participant ends up with 80% of $9,830, or $7,864. It matters because we are trying to develop a consistent way of "grossing up" when requesting in-service or hardship distributions. The amount we should request depends upon how the taxes are applied. Thanks in advance for any help you can give!
  3. We have an employee that took a cash distribution early in 2017. Employee has since been rehired and wants to restore her account as there was enough non vested monies forfeited to warrant the restoration. I'm all good with the employee sending back the entire amount and us restoring her account. No real problem there. My question is really for me as I am curious. What about the 20% withholding already done on the cash out? A 1099-R will be sent on the cash out. How does the employee rectify or "get back" the withholding? I'd assume at tax filing of her 2017 taxes, but I don't know. Maybe she doesn't get the taxes "back"... Just curious.
  4. Quick question: When filing the Form 5500 for a plan AND when paying taxes for the plan; are both instances paid under the company's EIN # or the Plan's EIN #? TIA! :)
  5. Profit sharing plan assets are trustee directed and held in a pooled account. Terminated participant requests a distribution of his vested balance. Participant completes application for distribution and sends it directly to the investment house. Investment Company makes full payment to the participant. What is the penalty, if any, to the plan sponsor for the failure to withhold the mandatory 20% tax from a lump sum distribution to a participant?
  6. What is used to determine the tax year for reporting a distribution - is it the distribution check date or the settlement date for the request? Trying to confirm what is correct for end of year distribution requests. For example, if a distribution is requested (on plan website) on December 30, 2013and the trades settle on December 31, 2013 and the check is issued and dated January 2, 2014, should the 1099-R be a 2013 form, or a 2014 form? What is the key date - settlement or check? I know that constructive receipt is noted in ERISA Online, but references do not specifcally note for tax reporting purposes(for 1099-R reporting).
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