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IRA Withdrawal — but didn’t cash the check

By Terry Savage on November 22, 2020 | Financial Planning / Retirement

On August 30, 2020 I closed an IRA CD for $218,000 with the plan of moving it into some other type of account I never cash the check because I thought I had more than 60 days to make up my mind and I was waiting until after the election now I’m wondering how to get out of this tax consequence

Terry Says

There is NO way to get out of this tax consequence! What a horrible mistake. You now owe taxes on ALL of this money — plus a 10% penalty if you are under age 59-1/2.. And you lose the future tax-deferred growth on that money!
Here is the rule:
You owe tax on a 401(k) or IRA distribution for the tax year in which the money was paid out, even if you don’t cash the check until the following year. Deferring income is a traditional tax-saving strategy, but a recent IRS ruling clarifies that not cashing a retirement plan distribution check doesn’t count.

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