Can I withdraw funds from my solo 401k and then put them back within 60 days without being hit by the IRS with taxes and penalties?
Good question and the answer is no because 20% of federal taxes has to be withheld even if rolled over within 60 days.
I have a lot of questions on this front.
I guess the rules are different for a 401k than an IRA in that respect? Fidelity wrote me a check for the entire amount of my rollover IRA and did not withhold any taxes. They just asked me to affirm some statement that relieved them of that responsibility. I think.
Correct that the 20% mandatory federal tax does not apply to IRAs but it does to 401k plans.
See following link regarding this rule:
I assume I would get that withholding back when I file my tax return. Would the withholding amount be treated like any other estimated tax payment at that time? I would be allowed to go ahead and make up for the withholding from other funds when I deposit back into an IRA or a qualified plan, right?
You will get back some of the withholding if you don’t owe any other income tax as the 20% is treated as tax on earned income. Therefore, yes the 20% can be viewed as an estimated tax payment. Yes you can make up the 20% from your personal funds if timely rolled over within 60 days.
Under what conditions is the 20% withholding required? Is it only for in-service withdrawals? Or are all distributions from 401k plans required to withhold 20%? Is the age of the account holder relevant?
Generally only death and required minimum distributions (RMDs) are not subject to the mandatory 20% federal tax withholding. See the following link: http://www.mysolo401k.net/does-the-20-federal-tax-withholding-apply-to-all-401k-distributions/
How about this strategy for fun? A direct rollover from 401k into IRA, then a distribution of the IRA with no withholding, then 60-days later a deposit back into the 401k?
Yes that would be allowed and the 20% withholding would not apply.
Solo 401k Distributions
Solo 401k Death Distributions
Solo 401k Required Minimum Distributions
Solo 401k Deadlines