🚀 go-pugleaf

In article <C0ALyv.48u@world.std.com> grady@world.std.com (Dick Grady) writes:

   In article <C086Jr.3A2@world.std.com> philip@world.std.com (Philip Borenstein) writes:
   >richb@jti.com (Richard Braun) writes:
   >
   >Be sure that you do a direct transfer to the IRA rather than take a
   >distribution from the 401(k). Otherwise, your former employer is required to
   >withhold 20% which you have to then "make up" when you place the money in
   >an IRA. You'll get the 20% back, of course, (as a tax credit I think). But
   >if the amount in your 401(k) is substantial, and you can't make the 20%
   >yourself, it becomes INCOME taxed at your rate with the 10% tacked on.

   The IRS isn't the agency that set this trap.

The IRS is in the same position as the police when required to enforce poorly
written laws.  They are often perceived as "the bad guys", because what they're
doing (under orders) can be stupid.  But by blaming the "messenger" rather than
the "sender" (elected officials), the problem just compounds.  Democracy isn't
working well in the U.S. today because Democracy requires an informed and involved
constituency.  It can be nigh well impossible to keep up, but with the number of
public watchdog groups around throwing out (often conflicting) information, there
isn't any excuse for not at least trying.

   *CONGRESS* did, in the 1992 tax reform (?) law.  And Bush signed it!
   The IRS is just enforcing the law, as written.

   So if you don't like this withholding provision, complain to Congrss and
   to Clinton.

I asked the financial powers around here what was going on.  The answer I heard ;-)
was that a lot of people were taking their distribution, not rolling it over, and
not paying the taxes on it.  (I guess the of loosing one's job, not having
sufficient cushion, and not being able to get another one in a reasonable amount
of time in today's economic climate isn't considered a hardship.  The government
always gets *their's* first!)

If you take the distribution after 01 January 93 in the form of a check, 20% is
withheld.  The administrator of whatever new plan you are in can send a request
to the former plan for that 20%.  Of course, the easiest method is for the old
plan to transfer the entire amount directly to the new plan, in which case no
withholding is required.

Of course, I don't know if Congress has required plans to actually talk to each
other :-(.

-everettm

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.................................................................................
Mark J. Everett	    : Cayman Systems Inc, 26 Landsdowne St, Cambridge, MA 02139
everettm@cayman.com : Phone 617-494-1999, Fax 617-494-5167, AppleLink CAYMAN.TECH