How To Rollover 401k Funds In One Easy Step

Knowing how to rollover 401k funds the easiest and quickest way will save taxpayers time and unpleasant surprises. The IRS tax laws are very clear and explicit on the handling of these funds. The easiest way to move money from one 401k account to another is by having the funds directly transferred from the current fund to the new fund.

A taxpayer has many rollover 401k options and advice from everyone on the best way to handle this change. The IRS allows taxpayers to withdraw this money and reinvest it within 60 days in the new account without paying a penalty. Many taxpayers are unaware the investor releasing the funds must withhold 20% and send this money to the IRS to pay any potential taxes or penalties that may be due. If the fund is invested within the 60 days, the taxpayer can apply for the refund of this money when the income tax form for that year is filed.

The problem is the new account must be 100% funded to avoid any penalties. The 20% sent to the IRS must be deposited in the new account within the 60-day period. This does not allow time for a taxpayer to file a tax return and get the money back.

The easiest way to avoid this problem is to have a direct transfer of a 401k rollover from one financial institution to another. This procedure is a matter of filling out some paperwork. The taxpayer will contact the current investment account holder and find out what information and forms they require.

Once the taxpayer has found a new home for the 401k account, the taxpayer will ask for the paperwork necessary to do a transfer. These forms need to be filled out completely and accurately; additional documentation may be required. The forms will be submitted to the correct investment account holders for processing.

The taxpayer will follow up on the process and make sure the shift of funds is actually done. The dollar amount transferred needs to be verified and any discrepancies addressed immediately. Financial institutions routinely handle these transfers and have a paperwork process set up to make it easy on everyone concerned.

The easiest and safest way to handle a rollover of 401k funds is to do a direct rollover from one financial institution to another. This eliminates any potential problems with the account. Financial institutions have devised a simple paperwork process for this procedure.