Someone told me if I do a transfer of funds or stock from one IRA to another in New Jersey that I must pay income tax on the transaction. This seems nuts, but you never know with politicians and bureaucrats. I suppose she meant N.J.tax.I explained that to my knowledge, if you transfer from a regular IRA to a Roth IRA, tax is due, but I did not think tax would be due from one IRA to another. She insists that it applies from one IRA custodian to another. She has mutual funds (probably money market) that she switches from one custodian to another to get the best interest rate. I do not invest like that, so I have not thought much about it.Could my friend be right? (It does not matter to me, since I do not plan to make such a transfer anyway.) Or did she screw up and have the funds pass through her hands from one custodian to the next?
A rollover from an IRA or 401K to an IRA or 401K is not taxed. It isn't clear what she is doing, but it is unlikely to be correct. She should see a tax professional. If the rollover is non-trustee-to-trustee, only one rollover can be done in a year. It is possible that she is taking a distribution (to minimize fees) of the funds and there could be withholding.
Someone told me if I do a transfer of funds or stock from one IRA to another in New Jersey that I must pay income tax on the transaction. This seems nuts, but you never know with politicians and bureaucrats. I suppose she meant N.J.tax.There is nothing different in the NJ treatment of IRA transfers/rollovers from that at the federal level. The only difference between NJ and federal treatment of IRAs is that NJ doesn't allow you to deduct IRA contributions under any circumstances. This means that all IRAs have basis under NJ law and distributions are always partially tax-free. Of course, most NJ IRA participants fail to track their IRA contributions for NJ purposes and end up paying more tax than they have to since they can't establish their NJ IRA basis.Ira
A rollover from an IRA or 401K to an IRA or 401K is not taxed. It isn't clear what she is doing, but it is unlikely to be correct. She should see a tax professional.I am sure you are right at the Federal level. I think she is saying this is a State of New Jersey thing. I already suggested she see a tax professional, but she is too cheap to do that. As a practical matter, I wash my hands of this.
Of course, most NJ IRA participants fail to track their IRA contributions for NJ purposes and end up paying more tax than they have to since they can't establish their NJ IRA basis.Whoo Boy! I have some clue as to my IRA basis, but is probably a mess anyway. Back before there were IRAs, starting in the late 1960s, I contributed to my company's savings plan for non union employees. (They had another for union employees.) For every dollar I put in, the company put in fifty cents up to 6% of my salary. I think this was before tax. Later they said we could put after tax money in there too, and I did. Somewhere along the line, 401(k)s became available and I do not know if the company changed this into a 401(k) or not. When I retired, I rolled this into an IRA, and the trustee put the untaxed money into the IRA and sent me a check for the taxed amount.So I may know the amount of the rollover. I know the amount of the rollover was much (say 10 to 15x) more than what I put in. But I have no idea if the amount that went into that savings plan was taxed or not (the untaxed for Federal purposes) for New Jersey. I keep my records like that for 7 years, so they are long gone. Sigh.Whatta can of worms.
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