Money help: Government and Tax Questions: After my father passed away, my mother was looking to transfer money from his old IRA to a mutual fund. - Help.com

I’m a little confused.

There is a 10% penalty if you start to pull money out of a traditional IRA before age 59 and a half. The 20 percent may be withholding for the income tax, since technically your mother made a withdrawal.

Can you provide more specific information? Did she withdraw the money before the end of 2006? If so, the info on the 1099 she received to file her taxes could be quite useful…

In most of case, there will be 10% penalty + tax.
IRA company are required to hold 20% tax if money is taken out before 59 1/2.

In addition, by the time you have to file a tax next year, there might be 10% penalty.

What ever numbers, it allways works this way.

Money out -> considered income and you have to pay income on money. Tax rate might be depending on your income level
10% penalty -> will be charged in addition

Call IRA compnay and find out what is going on. It seems when you say Government, it is government department who are handling IRA account.

By law, you can transfer to different IRA account within 60days if fund is transfered directly to other account. You can transfer to other account only once-a-year.

Rollovers not completed within 60 days can have horrible tax consequences. First of all, they are treated as taxable distributions. On top of the regular income tax on the entire amount, you may also have to pay a 10 percent excise tax penalty if the distribution was considered premature. If you place the amount into another IRA account, you must treat it as a brand-new IRA contribution for the tax year in which it is made, and another 15 percent excise tax penalty will apply to any portion of the amount that exceeds $2,000 (in 2001). These defective rollovers must be reported on Form 5329, Additional Taxes Attributable to IRAs, Qualified Retirement Plans, Annuities, Modified Endowment Contracts, and MSAs.

I would suggest you to talk to account or IRA specialist in Fidelity or some other financial company and act quickly.

You have 60days to create new account and deposit to another IRA to avoid.
Check following article:
http://www.ricedelman.com/planning/re…