I failed to distribute an inherited 401(k) that was found in an audit. What happens now?

By Denise Appleby AAA
A:

The party responsible for paying the penalty in such cases will be the beneficiary of the 401(k) plan.

You may want to start by finding out who the beneficiary is, if you have not already done so.

The next step would be to find out the distribution options that the beneficiary was required to use to withdraw the assets from the plan. This will help you to determine the penalties that may apply.

I recommend working with a professional, who can work with the IRS to have the penalties waived or reduced. The IRS has shown leniency in instances where the beneficiaries failed to withdraw the amounts because they were unaware of the withdrawal requirements. See page 31 of IRS Publication 575 for further information.

For more insight, read 'Tis The Season For Required Minimum Distributions.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. Does it make sense to convert a Traditional IRA to a Roth when the market’s down?

    If your modified adjusted gross income (MAGI) is $100,000 or less and you are not married filing separately, you may initiate ...
  2. Can I roll a Traditional IRA into a 529 college account for my grandchild?

    A 529 plan, also known as a "qualified tuition program", is an investment vehicle that allows individuals to save for education ...
  3. Can I still set up an SEP if one of my employees refuses to participate?

    You can establish the SEP IRA, even if the employee refuses to participant. However, you would need to establish an IRA for ...
  4. I want to close my IRA account. What percentage will I lose to tax?

    You can move the amount by means of a trustee-to-trustee transfer to another IRA, or roll over the amount to your 401(k). ...
RELATED TERMS
  1. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  2. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  3. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
  4. MyRA

    A new tax-advantaged retirement account that President Barack ...
  5. Target-Date Fund

    A mutual fund in the hybrid category that automatically resets ...
  6. Provident Fund

    A compulsory, government-managed retirement savings scheme used ...
comments powered by Disqus
Related Articles
  1. Retirement Strategies For Low Income ...
    Retirement

    Retirement Strategies For Low Income ...

  2. I Was Intimidated By Investing, But ...
    Investing Basics

    I Was Intimidated By Investing, But ...

  3. Impact Of Continuing To Work In Retirement ...
    Retirement

    Impact Of Continuing To Work In Retirement ...

  4. Independent 401(K): A Top Retirement ...
    Retirement

    Independent 401(K): A Top Retirement ...

  5. After-Tax Balance Rules For Retirement ...
    Taxes

    After-Tax Balance Rules For Retirement ...

Trading Center