Brokerages required to withhold estimated taxes/penalty?
- Houston101
- Posts: 103
- Joined: Fri Feb 26, 2010 2:15 pm
Brokerages required to withhold estimated taxes/penalty?
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?
-
- Posts: 911
- Joined: Wed Oct 21, 2009 8:12 pm
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.)
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)
Re: Brokerages required to withhold estimated taxes/penalty?
Yes from a 401(k).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?
No from an IRA.