ira and 401k rolloverWhen you are doing your tax return preparation, be sure to review any ira rollover or 401k rollover that you may have made for the year. If you don’t, you could be taxed and penalized.

IRA Rollover

When you make an ira rollover to another ira, be sure that you do not take possession of the funds.  If you take possession of those funds, when doing your tax return preparation you may have to include that money as taxable income. To be on the safe side, have the financial institutions transfer your funds between each other.

401k Rollover

The same discipline applies when making a 401k rollover. If you are keeping the funds within a 401k plan, have your old employer transfer the money directly to your new employer. If you are rolling the funds out of your 401k to an ira, have your old employer transfer the money directly to the institution holding your ira account. Do not take possession of the funds, if you do it could be considered a taxable transaction.