pension rollover

Pension Rollover

The transfer of funds from a retirement account to an IRA. This usually occurs when an account holder takes a new job or otherwise wishes to take advantage of the tax benefits an IRA offers over a pension plan. Most IRA programs only allow one rollover per year; with a Roth IRA, there is an income limit beyond which a rollover is not allowed. An IRA rollover may be accomplished through a direct transfer or by check; however, a check transfer brings a 20% withholding charge, so account holders are advised to make direct transfers. See also: Automatic Rollover.

pension rollover

Reinvestment of a lump-sum pension payout into an individual retirement account. The rollover permits a pension beneficiary to defer taxation until funds are paid out of the individual retirement account. A pension rollover is an alternative to paying taxes on a lump-sum payout, either in one year or by averaging over a number of years.
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However, Letter Ruling 9253049 stated that, generally, an IRA is not a pension, but could be treated as one if the IRA amounts came from a pension rollover and the recipient was at least 59 1/2 years old.
We request copies of clients' checks or bank statements showing the cleared check; detailed explanations on the returns for unusual items (using the tax software comments box); verification of IRA and pension rollovers; a comparison of previous and current 1099s (and an explanation from the client if there is no new one for the year); reconciliation of the gross income on a schedule C with the 1099s; verification the gross security sales figure entered on the tax return is equal to the amounts on brokerage firm 1099s; and answers to every question on the return.