Under what circumstances does the IRS require automatic income tax withholding?
If you, your surviving spouse or alternate payee (as defined by the Qualified Domestic Relations Order) decide to take a cash distribution from a 403(b)(7) or a QRP (Qualified Retirement Plan) or maybe Money Purchase Plan or Profit Sharing Plan)” instead of rolling over of the funds to a new account, 20% of the distribution will automatically be withheld for federal income tax. This mandatory 20% withholding does not apply to rollovers, Required Minimum Distributions, excess contributions or death. Additional state taxes may also apply.
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