5329 & Qdro

[Donanita]

Client received money from ex-spouse 401k. Rolled over and then pull some of the money out. Lawyer told her the 10% pen. didn't apply because of the QDRO. I told her it did as she rolled it over then pulled out. She wants another opinion. Can someone provide this.

[Jesse]

I think it is what it is - the fact is she took the withdrawal from her IRA, not from the 401(k) QDRO. I had this a few years ago, sat down with the client and financial advisor she wanted to keep some of the money and roll the rest into an IRA. Instead the financial advisor rolled it all into the IRA and then distributed funds from the IRA. I could find no exception to this rule, penalty applied.

[jimmcg]

Client received money from ex-spouse 401k. Rolled over and then pull some of the money out. Lawyer told her the 10% pen. didn't apply because of the QDRO. I told her it did as she rolled it over then pulled out. She wants another opinion. Can someone provide this.

You are correct. The transfer through the provisions of the court approved QDRO is penalty free. After that regular 72(t) provisions apply.

[Donanita]

My mistake, Client paperwork shows it was rolled into a 401k not Ira. Will this make a difference on the 10% pen,

[Mike Mac]

Just had one of these

I think you use code "6" on the 5329 to avoid the penalty.

[taxmom34]

t/p rolled over ex's 401K to own 401K? then made a withdrawal? sounds like a 401K withdrawal to me, didn't it lose it's QDRO status when she rolled it over into her own 401K? as a side note, if it was rolled into an IRA exception would not work.