... 2 Federal Income Tax Withheld from Profit Sharing Account
According to the IRS publications:
If you receive a distribution that qualifies to be rolled over, the payer must withhold 20% of it for taxes (even if you plan to roll the distribution over). ... If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. ...
Family Practice of Tampa withheld $20,000 of the $100,000 distribution to Amy which prevents the Moores from incurring any tax and early withdrawal penalties.
Since Amy is not currently employed and not planning on employment in the near future, we reserve analysis of the tax implications of possible future distributions from the conduit IRA since the laws frequently change in this tax area.
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