If you move assets from an existing individual retirement account (IRA) or an employer sponsored retirement plan to an IRA, you've completed an IRA rollover.
You owe no income tax on the money you move if you deposit the full amount into the new IRA within 60 days or arrange a direct transfer from the existing account to the new account.
If you're moving money from an employer's retirement plan to a rolllover IRA yourself, the plan administrator is required to withhold 20% of the total.
That amount is refunded after you file your income tax return, provided you've deposited the full amount into the new account on time, including the 20% that's been withheld. Any amount you don't deposit within the 60-day period is considered an early withdrawal and you'll have to pay tax on it.
You might also have to pay a penalty for early withdrawal if you're younger than 59 1/2. But if you arrange a direct transfer from your plan to the rollover IRA nothing is withheld.
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