Tax question (pension plan to Roth IRA)

You w/h 20% on the rollover from a pension to a Roth? Did your advisor tell you to do that?

You report the gross as income, and the 20 percent withheld as a withholding payment.

Understand that the 20 percent may have been too much or not enough, and will affect your tax owed or refund accordingly.

A touché, those indirect rollovers get tricky.

quote:

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Eventhough I got the check from the Texas teachers retirement. It is still considered a direct rollover. Thats why I am confused. Im going to take it to a CPA but just wanted to hear the Money talks opinion.

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There is a couple of things to consider:

1) Because you are going from a plan like Texas teachers retirement (a pre-tax plan) to a Roth (a post tax plan) there is income tax due on the value of the amount converted to the Roth.

2) If the check was made payable to the new fund company, and mailed to you, it's still a direct rollover, as you are unable to take constructive receipt of the money (cause it's made payable to the new bank).

3) If the check was made payable to you, it is NOT a direct rollover. You have 60 days to put it in the new account. If you do it within 60 days, there would be no tax on the amount transferred, it's treated like a rollover. However, if it was moved to a Roth, you would still owe tax, cause of the conversion.