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In 2018, I left a job where I had around $750ish dollars in a 403b retirement account.
After I left, I receive a check in the mail for around $550ish dollars from the account with a letter stating the account was closed out since I left the company.
I call the financial company and ask what I should do with the check. They suggest a rollover. I decide to put it in a Roth IRA since tax money seemed to be taken out already.
I transfer the check into a Roth IRA.
I visit the account often online and it essentially says since the money is post tax, you can use it anytime you want.
In early 2020, I decide to take out $500 from the $550 in the account for an expense for my house.
Now as I am doing my taxes through TurboTax, its showing that I took the money out and has me claiming it as taxable income.
I didn't think I should be paying taxes on that money, since I thought I already did.
There is a box that asks if the money is rollover money from a retirement account. I check that box and it then takes the taxes away. When I uncheck it, it has me to owe $150 in taxes.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Get more education / professional advice on:
The original tax structure of your 403B (Likely taxable, tho a few recent 401k and 403B had Roth options, very unlikely for a $550k distribution)
STRICT time frame (60 days?) for a Rollover if you get a check / handle the funds yourself (bad idea)
xx% would be taxable if rolled to a ROTH (likely 100% in your case, at the time of the rollover (2018))
100% of your withdrawal for a personal expense (buying a home) would be a taxable distribution from a traditional IRA, but NOT a Roth.
Estimated pre-paid taxes and penalty for not paying within the 'realized' qtr could also be an issue for you.
Get some very good help with this. (pay for it if necessary, but get referrals before committing to a resource for this. I much prefer to use 'enrolled agents' (Tax professionals) to CPA (accounting professionals).
You want someone expert in IRA / Qualified distributions.
In 2018, I left a job where I had around $750ish dollars in a 403b retirement account.
After I left, I receive a check in the mail for around $550ish dollars from the account with a letter stating the account was closed out since I left the company.
I call the financial company and ask what I should do with the check. They suggest a rollover. I decide to put it in a Roth IRA since tax money seemed to be taken out already.
I transfer the check into a Roth IRA.
I visit the account often online and it essentially says since the money is post tax, you can use it anytime you want.
In early 2020, I decide to take out $500 from the $550 in the account for an expense for my house.
Now as I am doing my taxes through TurboTax, its showing that I took the money out and has me claiming it as taxable income.
I didn't think I should be paying taxes on that money, since I thought I already did.
There is a box that asks if the money is rollover money from a retirement account. I check that box and it then takes the taxes away. When I uncheck it, it has me to owe $150 in taxes.
I don't want to get in trouble. What do I do?
You need to look at the paperwork that they sent.
The 403B was likely pre-tax, it would unlikely be ROTH (post tax) money unless you chose that specifically and not all plans even offer that option. Because they did not send the full amount, it is almost certainly was not a ROTH account.
The difference between the $750ish in the account and the the $550ish amount they sent as a distribution is likely tax withholdings. Look for the form that they sent with the payment.
The other thing is that you have 60 days to roll it over to prevent it being a distribution and paying penalty and taxes. If it had been transferred directly to an IRA account, you would not need to worry about the 60 days and they would not have withheld the $200ish for distribution taxes.
You need to talk to the current account provider about the account to make sure everything is correct - the good news is the $200ish difference from the distribution probably would cover the tax. Find the form sent with the payment and talk to the provider, they may have the data you need.
Don't forget that money was for retirement. If you're under the age of 59.5 (I believe that's the right age) then you will also owe early withdrawal penalties on that money, to the tune of around 10%.
Don't forget that money was for retirement. If you're under the age of 59.5 (I believe that's the right age) then you will also owe early withdrawal penalties on that money, to the tune of around 10%.
Yeah I was wondering why that had not been mentioned. Sure hope the OP knew that.
Based on the data, it was recharacterized from a 403B to a ROTH IRA account so 59.5 doesn't really apply (as long as 60 day window was met) - the tax is the tax of conversion not a penalty which is why didn't mention it. Just need to check with the provider to ensure that paperwork reflects that conversion.
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