IRA Rollover to ROBS 401k

As long as you are rolling over funds from an eligible IRA (only Roth IRA funds are not eligible), there are two ways to move IRA funds to a ROBS 401k business financing vehicle.

Option 1: Via a Direct Rollover:

When funds are directly rolled over from IRAs to a 401k for business financing, the check is made payable in the name of the 401k or directly deposited electronically into the 401k account. This is the preferred method of moving funds from an IRA to a 401k because it is reported by the releasing financial institution holding the IRA funds on Form 1099-R using a code “G” in box 7 that communicates to the IRS the IRA funds were directly deposited into a 401k.

Option 2: Via a Rollover:

Instead of making the check payable in the name of the 401k, the check is made payable in the name of the IRA holder or wired into his or her personal bank account. As a result, the IRA holder only has 60 days to deposit the funds into the 401k in order to avoid taxes and early distribution penalties. The financial institution holding the IRA reports the distribution on Form 1099-R using either code 7 or 1 in box 7.

 

 

 

 

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