Quarterly US Taxes
March 21, 2022 10:59 AM Subscribe
Can you get a refund for quarterly-filed taxes if you’ve overpaid, or is it payments only, with refunds issued only at the end of the year?
I’d like to rollover all my old employer 401k’s into an IRA. One account won’t do a direct rollover anymore, and will only mail me a check after the 20% withholding, which I then need to make-up with other personal funds within 60 days to avoid the withholding portion being classified as a disbursement. I’d like to get the withheld portion back ASAP.
I’d like to rollover all my old employer 401k’s into an IRA. One account won’t do a direct rollover anymore, and will only mail me a check after the 20% withholding, which I then need to make-up with other personal funds within 60 days to avoid the withholding portion being classified as a disbursement. I’d like to get the withheld portion back ASAP.
Response by poster: Unless I’m misreading their disclosures, they’re saying that any check that goes through my hands, regardless of payee, gets the withholding.
posted by hwyengr at 11:20 AM on March 21, 2022
posted by hwyengr at 11:20 AM on March 21, 2022
My experience with quarterly taxes is that there would be no refund intra year, one would simply reduce the next payment to make up for the difference.
posted by JohnnyGunn at 11:21 AM on March 21, 2022 [1 favorite]
posted by JohnnyGunn at 11:21 AM on March 21, 2022 [1 favorite]
Response by poster: One last thing I forgot to mention, my income is only W2 based, outside of this situation.
posted by hwyengr at 11:28 AM on March 21, 2022
posted by hwyengr at 11:28 AM on March 21, 2022
This section of the Code of Federal Regulations seems to require 401(k) plans to do direct rollovers. IANAL, so there might be some complexities, but the title is "Requirement to offer direct rollover of eligible rollover distributions," and it says, "To satisfy section 401(a)(31) ... a plan must provide that if the distributee of any eligible rollover distribution elects to have the distribution paid directly to an eligible retirement plan ... then the distribution will be paid to that eligible retirement plan in a direct rollover..."
One option seems to be for them to send you a check for the full amount (no withholding) but made out to the new plan. That would be a bit of a pain for you but might save some fuss.
I'd ask the institution you've chosen to manage your IRA to contact the existing plan directly. They obviously have an incentive to get this done and should have the relevant experience. If that doesn't work, then I'd contact the plan directly, cite the CFR, and threaten to report them to the IRS if necessary.
posted by Mr.Know-it-some at 11:28 AM on March 21, 2022 [3 favorites]
One option seems to be for them to send you a check for the full amount (no withholding) but made out to the new plan. That would be a bit of a pain for you but might save some fuss.
I'd ask the institution you've chosen to manage your IRA to contact the existing plan directly. They obviously have an incentive to get this done and should have the relevant experience. If that doesn't work, then I'd contact the plan directly, cite the CFR, and threaten to report them to the IRS if necessary.
posted by Mr.Know-it-some at 11:28 AM on March 21, 2022 [3 favorites]
Unless I’m misreading their disclosures, they’re saying that any check that goes through my hands, regardless of payee, gets the withholding.
Ignoring for a moment the fact that this shouldn't be the case... Have you contacted your "new" brokerage and asked them to initiate the rollover from your old brokerage? Almost all of them will do it for you, and nothing goes through you at all.
posted by NotMyselfRightNow at 12:14 PM on March 21, 2022 [5 favorites]
Ignoring for a moment the fact that this shouldn't be the case... Have you contacted your "new" brokerage and asked them to initiate the rollover from your old brokerage? Almost all of them will do it for you, and nothing goes through you at all.
posted by NotMyselfRightNow at 12:14 PM on March 21, 2022 [5 favorites]
> my income is only W2 based
It would be better if you can simply avoid the withholding as others have described. (And I'm pretty sure you can do that - transferring funds to a new account is commonly done and people who do that don't commonly have to deal with this 20% withholding issue - they are able to just transfer the entire amount to a new account.)
But if you can't, your other option is to reduce your W-4 withholding amounts from your regular job(s) to adjust. You may be able to partially compensate or completely compensate for the lump sum withholding - it depends on your income and other factors.
The basic process is to make an estimate of what your total tax bill for the year will be - including your regular federal income tax withholding, this additional withholding, and then best estimate of the amount of tax you will actually pay for the year - and then adjust your W-4 withholding amount to match that.
This article from Kiplinger goes over the basic process.
Use the IRS Withholding Estimator to (pretty) precisely calculate how much withholding you need, taking into account this large IRA disbursement withholding, and exactly what figures you need to put into a new W-4 to make this withholding amount happen. The Estimator actually spits out a pre-filled form W-4 with the right amounts placed in the right rows. Just submit that W-4 to your employer and there you go.
You won't get the extra withholding $$$ back instantly - but at least you'll have it in installments over the next 9 months or so. That's going to be several months quicker than just waiting until you file your 2022 tax return and get a refund from that.
Don't forget to submit a new W-4 in January of 2023. (If you don't change your withholding level back to normal in 2023 you'll end up with a large & unexpected tax bill for that year.)
posted by flug at 2:16 PM on March 21, 2022 [3 favorites]
It would be better if you can simply avoid the withholding as others have described. (And I'm pretty sure you can do that - transferring funds to a new account is commonly done and people who do that don't commonly have to deal with this 20% withholding issue - they are able to just transfer the entire amount to a new account.)
But if you can't, your other option is to reduce your W-4 withholding amounts from your regular job(s) to adjust. You may be able to partially compensate or completely compensate for the lump sum withholding - it depends on your income and other factors.
The basic process is to make an estimate of what your total tax bill for the year will be - including your regular federal income tax withholding, this additional withholding, and then best estimate of the amount of tax you will actually pay for the year - and then adjust your W-4 withholding amount to match that.
This article from Kiplinger goes over the basic process.
Use the IRS Withholding Estimator to (pretty) precisely calculate how much withholding you need, taking into account this large IRA disbursement withholding, and exactly what figures you need to put into a new W-4 to make this withholding amount happen. The Estimator actually spits out a pre-filled form W-4 with the right amounts placed in the right rows. Just submit that W-4 to your employer and there you go.
You won't get the extra withholding $$$ back instantly - but at least you'll have it in installments over the next 9 months or so. That's going to be several months quicker than just waiting until you file your 2022 tax return and get a refund from that.
Don't forget to submit a new W-4 in January of 2023. (If you don't change your withholding level back to normal in 2023 you'll end up with a large & unexpected tax bill for that year.)
posted by flug at 2:16 PM on March 21, 2022 [3 favorites]
As others say, your new company should be much more helpful in getting the direct transfer done. If the can't, I think you should call the old company, because this does not seem right at all.
posted by soelo at 3:02 PM on March 21, 2022
posted by soelo at 3:02 PM on March 21, 2022
If your income is only w2 based income there is no reason you should be filing quarterly estimated taxes. Unless you have a suspicion that you are not having enough taken out and you want to cover the difference.
That being said no there are no refunds for any estimated payments you are filing in quarterly estimated earnings 1040s. Typically the quarterly taxes are filed by self employed business owners or contractors who may owe for instance unemployment insurance
posted by The_imp_inimpossible at 2:20 AM on March 22, 2022
That being said no there are no refunds for any estimated payments you are filing in quarterly estimated earnings 1040s. Typically the quarterly taxes are filed by self employed business owners or contractors who may owe for instance unemployment insurance
posted by The_imp_inimpossible at 2:20 AM on March 22, 2022
This thread is closed to new comments.
posted by zippy at 11:05 AM on March 21, 2022