Chapter 9 - Taxation

Question 1

Rollover Distributions

Answer 1

A rollover can be made by the individual following payment from the plan or directly by the plan trustee.

Question 2

Form 945

Answer 2

A Form 945 filing is not required for any year in which no withholding was required.

For 945 if required to be filled must be filled by Jan 31 of the calendar year following the year of distribution.

Question 3

Mandatory 20% Withholding

Answer 3

If a distribution is an eligible rollover distribution, mandatory 20% withholding is generally required if the distribution is not rolled over in a direct rollover transaction.

However, if all distributions to the participant for the calendar year are less than $200, no withholding is required.

Mandatory 20% withholding applies only to the portion of the eligible rollover distribution that is includible in gross income. Therefore, a nontaxable distribution is not subject to withholding.

Question 4

Form 1099-R

Answer 4

Form 1099-R need not be prepared for distributions of $10 or less.

Form 1099-R reports distributions made from the plan and includes information regarding the applicability of the 10% additional income tax on early distributions. It must be provided to the participant by January 31st of the calendar year following the year of the distribution and a copy must be filed with the IRS by February 28th of the calendar year following the year of the distribution.