Steve D. Perkins wrote:

- quote -

You need to deposit the funds including the amount withheld
into the IRA within the requisite 60 day period to avoid
being taxed. You should inform the IRA trustee in writing,
that this deposit is not a 2003 or 2004 IRA contribution but
is a rollover from a 401K distribution.

You would report the gross distribution on your tax return
with a taxable amount of zero and write the word "Rollover"
next to the applicable line number.

--
Alan
http://taxtopics.net

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-- BEGIN BACKGROUND INFORMATION ---
(1) I was laid-off from a company about a year and a half
ago. I transferred the funds from my 401k into a Rollover
IRA. I had not been with the company long enough to be
vested in any employer-matching funds.

(2) APPARENTLY something happened with that company a few
months ago. One of the mutual fund families in the 401k plan
got caught in market-timing fraud, and there was some
lawsuit or federal action. An information packet was sent
out telling me that I have more money coming my way because
I was invested in those funds at the time of the fraud. The
packet had forms for initiating a Rollover IRA transfer, or
the money would be paid out as a cash distribution after 60
days.

I capitalized "apparently" at the beginning of the first
paragraph, because I never received this information packet.
I've changed addresses since the time I was with my former
company, and the package apparently wasn't forwarded
correctly by the Post Office.

(3) Yesterday I received a fairly nice-sized check out of
the blue. It was labeled as a cash distribution and had a
large chuck withheld for taxes. The check was dated 12/31,
making it applicable for the tax year I'm about to file.

(4) Today I called that 401k management company, and had the
missing blanks above filled in for me. I wanted to just
tear up this check or send it back, and start over with a
normal Rollover IRA rollover. They weren't going for that.
They told me I would need to do an "indirect rollover"...
deposit the check directly with my Rollover IRA brokerage,
and write a personal check to cover the exact amount of the
taxes that were withheld (that's fine with me, it's not THAT
large of an amount).

The 401k company would be sending me a tax document within
the next few weeks, and the Rollover IRA company should send
me a "5329 form" showing all the money that I deposited.
This would then all balance out when I file taxes next
month, and those withheld taxes would come off my tax bill.
However, they weren't sure if the Rollover IRA folks would
send that "5329" immediately or not until the next tax
season.

(5) I called the Rollover IRA folks, and the girl I spoke
with didn't even know what a "5329" was. She said they'll
send a "5498 form" sometime in May.
-- END BACKGROUND INFORMATION ---

Okay, I just want to roll this crap over into my Rollover
IRA. I don't mind "floating" the withheld taxes for a
couple of months... but I do want to be sure it balances out
when I file, and the full amount goes into the IRA with no
tax penalty for me. What do I need to do here?

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