Profit Sharing

[Gary]

I have a client that is taking a buy-out from her employer. In addition to the buy-out, she will be receiving her profit-sharing? Will this be reported on a 1099-R? If so, I presume she can roll it over into an IRA? She also has a 401-K that will be rolled over. Any advice would be appreciated.

Gary

[ecb34691]

Profit sharing will be shown on a 1099R as I just saw a JC Penny one today. They did rollover to an IRA and so the distribution code was G. (with agent to agent transfer)

[S T]

401K and Profit Sharing

Have employee set up a Rollover Account and then fill out employer papers for a direct transfer. 1099R forms will be issued but will be coded "G"

If employee receives the funds, the old employer will deduct 20% Federal Tax from the distribution. If t/p does not rollover that amount as well, it will be subject to tax and possibly 10% early withdrawal penalty.

Payment to you option. If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. However, the full amount is treated as distributed to you even though you actually receive only 80%. You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional IRA.

If you are under age 59½ when a distribution is paid to you, you may have to pay a 10% tax (in addition to the regular income tax) on the taxable part (including any tax withheld) that you do not roll over. See Tax on Early Distributions, later.

See TTB 13-21 thru 13-23 or Pub 575 http://www.irs.gov/publications/p575/ar02.html#d0e1093

Sandy

[Gary]

Thanks

Thank you all for your advice.

Gary