If early distribution from an employer’s plan is paid directly to you, your plan administrator will normally withhold income tax at a 20 percent rate. If you roll over distribution to a new plan, you must replace that 20 percent of funds that were withheld and deposit that amount in new plan or you will owe taxes on that amount. To avoid inconvenience of this withholding, you can have your old plan’s administrator transfer rollover amount directly to new plan or a traditional IRA.

All early distributions must be reported to IRS. You will report tax-free rollovers on lines 15a and 16a of Form 1040 along with any taxable distributions, but you will enter on line 15b or 16b only taxable amounts you don’t roll over.

Early distributions from retirement plans can involve complex tax issues. Make sure you understand issues or get competent tax advice.

Richard Chapo is CEO of Business Tax Recovery - Obtaining tax refunds for small businesses for overpaid taxes. Discovery tax strategies and deductions in our tax articles section.

If Justice Department concurs, it files suit against promoter requesting that court order promoter to refrain from fraudulent activity. Depending on facts and circumstances of case, court may issue a temporary restraining order, a temporary injunction or a permanent injunction.

At present, courts have issued injunctions against 99 abusive scheme promoters –– 81 permanent injunctions and 18 preliminary injunctions. They have issued permanent injunctions against 17 abusive return preparers. The Justice Department has filed an additional 49 suits seeking injunction action –– 28 against scheme promoters and 21 against return preparers.

The IRS is currently investigating more than 1,000 additional promoters for possible referral to Justice Department and conducting individual examinations on thousands of tax scheme participants.