Tax Reporting: Income tax withholding on IRA distributions

In certain circumstances Federal income tax is required to be withheld on an IRA distribution at a rate of 10% if an election is not made at the time of your IRA distribution.  You may elect to have no tax or a different amount withheld.  If you roll over your employer-sponsored 401(k) retirement plan assets to an IBKR IRA account, the distribution may be subject to a mandatory withholding rate of 20%.  Any amount not rolled over is subject to tax, and if you are under 59½, an additional 10% early withdrawal penalty may apply.  You must roll the entire distribution over, including the amount withheld, within 60 days for the rollover to be tax-free. Income tax is not withheld on a direct rollover.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.