If an employee quits with under $200 in their 401k do we have to pay taxes on it?

Question

If an employee quits with under $200 in their 401k do we have to pay taxes on it?

Answer 1

Not if you do a trustee to trustee rollover into an IRA.  If you don't do this, the administrator is going to automatically cash out the account since it is less than $5000.

Answer 2

You will still owe taxes...they just aren't required to withhold any money from check.  That automatic 20% withholding is waived from any distribution under $200.

Answer 3

If you are disbursing it as income now, you sure do.

Answer 4

Yes.