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Conference 7.286::digital

Title:The Digital way of working
Moderator:QUARK::LIONELON
Created:Fri Feb 14 1986
Last Modified:Fri Jun 06 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:5321
Total number of notes:139771

2095.0. "lump sum distributions: your government at work" by OXNARD::KOLLING (Karen/Sweetie/Holly/Little Bit Ca.) Wed Sep 09 1992 22:26

    There was an article in the local newspaper about a change in the
    federal law about lump sum distributions that seemed likely to bite
    some people being TFSOed.  I prepend the usual disclaimers about
    "my understanding", "consult your tax advisor", and all that stuff:
    
    It used to be that someone getting a lump sum distribution could
    receive the funds and hang on to them for 60 days while they decided
    what they wanted to roll the distribution into.  Now if you do this,
    the feds withhold 20% of the distribution before it gets to you,
    and keep it until the end of the year (or tax refund time?).
    
    Therefore when you establish
    the "destination account" (presumably mostly before the withholding
    gets returned to you, since it's within 60 days), you have to come up
    with an amount equal to that 20% from your other funds or you lose the
    right to keep it in the distribution, and, what's more, you get hit
    with a premature withdrawal penalty (12%?)  Losing the right to keep
    it as part of the distribution means you lose the quasi-IRA tax
    benefits on that 20%.
    
    The way around this is to do a trustee-to-trustee transfer from DEC to
    a qualified place for the lump sum.
T.RTitleUserPersonal
Name		DateLines
2095.1SQM::MACDONALDThu Sep 10 1992 13:0114
    
    I think you're comparing two different things.  What you seem
    to be talking about I believe are retirement/IRA funds.  A
    severance package is something different.  I believe that would
    simply be considered income.  The problem with those is when they
    come late in the year and no money is withheld i.e. you are TFSO'd
    in December with say 26 weeks pay.  In April you are liable for
    taxes on what is really a year and a half's worth of income and
    may be in withholding trouble if DEC didn't do it and you didn't
    do it yourself by sending an extra amount to the IRS as soon as
    you got it.
    
    Steve
2095.2terminate the taxman!ODIXIE::RHARRISBowhunters never hold back!Thu Sep 10 1992 13:124
    consult your tax advisor.
    
    Bob
2095.3Re: .1STAR::PARKETrue Engineers Combat ObfuscationThu Sep 10 1992 13:1711
I think they may be concerned about rolling over available retirement funds
and/or 401k (SAVE) money, not the TFSO lump.

This is a real concern, as you have to come up with 20% of the total until next
April or take a 10% hit + taxes on that 20% and loose the right (possibly)
of the WHIOLE rollover amount.

Also note the rollover IRA MUST be different (as to what I last saw) than your
self contribtion IRA.

Bill
2095.4Many don't intend to roll it overMUDHWK::LAWLEREmployee says 15000 analysts must go!Thu Sep 10 1992 13:2212
    
    
      That sounds a lot like "backup witholding".  
    
       My guess is that lots of people who are getting layed off are
    simply keeping the 401k money for their immediate survival,  and
    the tax-man is simply making sure they don't use his share for
    something frivolous like eating  before next april...
    
    
    						-al
2095.5LJOHUB::NSMITHrises up with eagle wingsThu Sep 10 1992 14:074
    It applies to rollover of tax-deferred accts such as 401K -- *and*
    it doesn't go into effect till January.  Then your rollover must be
    done electronically direct deposit in order to avoid the tax
    withholding.
2095.6electronic may be better, but...DENVER::VIGILWilliams VIGIL, y que mas?Thu Sep 10 1992 14:3111
    re. -1
    "rollover must be done electronically..."
    
    Not so.  I have rolled over 401K funds that I received after I left one
    employer and worked for another.  I was merely instructed NOT to cash
    the check but to deposit it as pre-arranged with the new employer's
    plan.
    
    My son recently did the exact same thing when he switched jobs.
    
    Williams
2095.7SCAACT::AINSLEYLess than 150 kts is TOO slowThu Sep 10 1992 15:125
    re: .6
    
    Re-read .5.  The key word here is JANUARY.
    
    Bob
2095.8key words are essentialSTOKES::BURTThu Sep 10 1992 17:171
    yes, as of january, one won't be able to hand carry it without penalty.