If a plan pays an eligible rollover distribution to you instead of another trustee, IRC 3405(c) requires 20% federal withholding. A direct trustee-to-trustee rollover withholds $0.
$50,000 paid to you: withheld $10,000, check $40,000. To roll the full $50,000 within 60 days you replace the $10,000 from other cash.
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Direct answer: $50,000 → $10,000
- Paid to you: $50,000 × 20% = $10,000.00 withheld
- Check = $50,000 − $10,000 = $40,000.00
- Cash to replace for a full 60-day rollover = $10,000.00
- Same $50,000 sent trustee-to-trustee: withheld $0, transfer $50,000
withheld = distribution × 20% if paid to you withheld = $0 if direct rollover to another plan or IRA net check = distribution − withheld a full 60-day rollover needs the withheld 20% replaced from other funds
Checks you can re-run
| Distribution | Mode | Withheld | Check / net | To replace (60 days) |
|---|---|---|---|---|
| $10,000 | Paid to you | $2,000.00 | $8,000.00 | $2,000.00 |
| $25,000 | Paid to you | $5,000.00 | $20,000.00 | $5,000.00 |
| $50,000 | Paid to you | $10,000.00 | $40,000.00 | $10,000.00 |
| $50,000 | Direct rollover | $0 | $50,000.00 | $0 |
If you deposit only the $40,000 check into an IRA, the withheld $10,000 can stay taxable (and may still face the 10% additional tax if you are under 59½ and no exception applies). That extra tax is the early distribution page, not this one.
Room left to defer this year is a different cap: 401(k) contribution limit.
What this is not
- Not backup withholding. A 1099 without a TIN is 24%: backup withholding.
- Not a bonus. Supplemental wages are 22% (37% over $1M): bonus tax.
- Not a loan. A 401(k) loan is not an eligible rollover distribution: 401(k) loan.
Because the plan paid you. Direct rollover is the path that withholds $0. The 60-day window is a second chance, and it needs extra cash to restore the 20%.
It is federal withholding. You may credit it on Form 1040. It is not automatically added to the IRA unless you replace it.
No. Eligible rollover withholding is a flat 20% when paid to you. Regular paycheck FIT is federal tax withholding.