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Joined: Jan 2010
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Campfire Ranger
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OP
Campfire Ranger
Joined: Jan 2010
Posts: 23,533 |
my son quit a job a year ago, got a check in the mail from Fidelity for a few hundred dollars. I know if he cashes it and doesn't put it into something he'll have to pay like 60% tax on it
he doesn't have a retirement plan at his existing job so what are his options.
I think if you open a roth you have to have like a minimum $2500 is that right?- anyt other options that he can roll this money over into?
have you paid your dues, can you moan the blues, can you bend them guitar strings
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Joined: Jan 2018
Posts: 2,387
Campfire Regular
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Campfire Regular
Joined: Jan 2018
Posts: 2,387 |
If he has to file a return, he has to report it for the tax year he received it. IE, if he received check in 2020, it will be reported in next years return. If he goes into his bank and rolls it into another qualified retirement account, he will not have to pay taxes. IF he cashes the check, depending on income level, he may or may not have a tax liability. Fidelity will have reported the distribution to the IRS.
In training to be an obedient master to my two labs
Shooting, fishing and hunting
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Joined: Jun 2019
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Campfire Outfitter
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Campfire Outfitter
Joined: Jun 2019
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An elderly accountant I knew back in the 1960's gave me some very good advice. He told me to report every dime I made, regardless of the source, and then take every deduction I could dream up to avoid paying any more tax than necessary. To quote him exactly- - - - -"An improper deduction might get you a fine or a penalty to pay. Unreported income can be a felony, with some jail time attached!" Good counsel! Jerry
Ignorance can be fixed. Stupid is forever!
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Joined: Mar 2007
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Campfire Regular
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Campfire Regular
Joined: Mar 2007
Posts: 1,734 |
He can roll it into an IRA. Due to the modest amount he may not have enough for a fund company, but a bank or credit union may be able to help. He has 60 days to complete this.
If it was from a 401k or a SEP (non-ROTH) and he accepts the money, he will add the amount to his taxable income for the year (thus be taxed at his marginal rate) plus the federal government will charge him an additional 10% penalty. If the money came from a SIMPLE he could possibly pay taxes plus a 25% penalty.
405wcf
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Joined: Nov 2011
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Campfire 'Bwana
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Campfire 'Bwana
Joined: Nov 2011
Posts: 30,950 |
Presuming it's from something like a 401k, he has 60 days to deposit into an IRA.
Since the check was mailed to him, Fidelity probably withheld taxes, so he'll also need to gross up the check for anything withheld, or he'll be taxes on that as well.
Tax rate is ordinary income plus a 10% penalty.
You didn't use logic or reason to get into this opinion, I cannot use logic or reason to get you out of it.
You cannot over estimate the unimportance of nearly everything. John Maxwell
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Joined: Apr 2017
Posts: 19,590
Campfire Ranger
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Campfire Ranger
Joined: Apr 2017
Posts: 19,590 |
Vanguard money market IRA for now, like yesterday. Then get to studying.
"Maybe we're all happy."
"Go to the sporting goods store. From the files, obtain form 4473. These will contain descriptions of weapons and lists of private ownership."
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Joined: Jan 2010
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Campfire Ranger
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OP
Campfire Ranger
Joined: Jan 2010
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have you paid your dues, can you moan the blues, can you bend them guitar strings
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Campfire Savant
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Campfire Savant
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The greatest investment is pussy. I wish I had spent more chasing it.
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Joined: Aug 2010
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Campfire Ranger
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Campfire Ranger
Joined: Aug 2010
Posts: 27,926 |
Usually the bank you deal with has plenty of retirement options like an IRA .the bank is typically very versed also on the rules for such things. If you cant go that route, contact Vanguard on their website.
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Joined: Aug 2010
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Campfire Ranger
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Campfire Ranger
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The greatest investment is pussy. I wish I had spent more chasing it. Great minds think alike.
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