Brokerages required to withhold estimated taxes/penalty?

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Houston101
Posts: 103
Joined: Fri Feb 26, 2010 2:15 pm

Brokerages required to withhold estimated taxes/penalty?

Post by Houston101 »

I am just curious if I decide to take an early withdrawal from 401K and/or Roth IRA are the brokerages required to withhold estimated taxes and penalty or is that something you take care of yourself when you file the taxes?
brxn
Posts: 150
Joined: Mon Aug 03, 2009 1:04 pm
Location: USA

Post by brxn »

I can only give you one data point ... when I liquidated a 401k from previous employer, taxes were withheld automatically. the check I got was pre-shrunk.
retcaveman
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Joined: Wed Oct 21, 2009 8:12 pm

Post by retcaveman »

FWIW, when I take a distribution from my regular (non Roth) IRA, I am given the option to withhold or not. I have done both without problem.

I believe if you cash out, even if it's to reinvest the money in another IRA, they must withhold at least 20% unless you do a direct transfer. If the money goes to you vs direct, you have 60 days to reinvest the money (80%) without penalty, but you will have to make up the 20% withheld. You can get back your 20% when you file your taxes. (I think I have that right.)
"The wants of mortals are containers that can never be filled." (Socrates)
dkturner
Posts: 1940
Joined: Sun Feb 25, 2007 6:58 pm

Re: Brokerages required to withhold estimated taxes/penalty?

Post by dkturner »

Houston101 wrote:I am just curious if I decide to take an early withdrawal from 401K and/or Roth IRA are the brokerages required to withhold estimated taxes and penalty or is that something you take care of yourself when you file the taxes?
Yes from a 401(k).

No from an IRA.
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