IRA to 403(b) | Ed Slott and Company, LLC

IRA to 403(b)

I am completing paperwork to move money from my IRA to a 403(b).

I am filling out a distribution form and selecting direct rollover to a qualified plan as the type of distribution. However, the investment firm tells me I have to withhold state taxes (I live in Michigan). What happens to the 4.25% state taxes that are withheld? Am I doing this correct?

  • There should not be a withholding requirement for a direct rollover as such rollovers will not be included in your AGI. The check should be made out to the 403b plan and the 1099R should be coded G. If the firm refuses to listen, then you still should have the option to submit Form MI W-4P to waive the withholding.
  • If they still mess up and withhold, then in order to eliminate tax on the withholding, you would have to replace the withheld amount with other money to complete the rollover. That's a hassle, so you should contest the withholding in the first place.
 

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