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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?


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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.


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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


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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.

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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.


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Vanguard money market IRA for now, like yesterday. Then get to studying.


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good stuff
thanks guys


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The greatest investment is pussy. I wish I had spent more chasing it.

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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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Originally Posted by hanco
The greatest investment is pussy. I wish I had spent more chasing it.

Great minds think alike.


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