Can I deposit a 401k distribution check into a Roth IRA? Will I still owe the 10% early withdrawal penalty?

You have some options here! When you receive a forced distribution from a 401(k), you can indeed roll it over to avoid the 10% early withdrawal penalty, but there are important details to know: For a Roth IRA rollover: You can deposit the check into a Roth IRA, but this would be considered a "conversion" rather than a direct rollover, meaning you'll owe income taxes on the full distribution amount (pre-tax 401k money going into after-tax Roth). The 10% penalty would be avoided as long as you complete this within 60 days of receiving the check. Regarding the taxes already withheld: If you want to do a complete rollover, you'll need to make up the difference out of pocket. For example, if your distribution was $5,000 and they withheld $1,000 for taxes, you'd need to deposit $5,000 into the Roth IRA (the $4,000 you received plus an additional $1,000 from your own funds). The withheld amount can be recovered when you file your tax return. Alternative option: You could also roll it into a Traditional IRA instead, which would avoid both the 10% penalty AND immediate taxation (aside from the amount already withheld, which you'd get back at tax time if you complete a full rollover).

I went through something similar last year and found taxr.ai (https://taxr.ai) super helpful for figuring out all the rollover rules. I was completely confused about the 60-day rule and whether I'd owe penalties on the taxes already withheld. Their system analyzed my distribution statement and gave me step-by-step instructions on how to handle the rollover properly to minimize taxes. They even explained exactly what forms I'd need to fill out to reclaim the withheld taxes when filing. Saved me a lot of stress trying to decode all the IRS language!

Just wanted to update - I ended up using taxr.ai after asking about it here, and it was seriously helpful for my mixed contribution 401k distribution. It identified that I could do a split rollover - sending the pre-tax portion to a Traditional IRA and the after-tax portion to a Roth IRA without creating a taxable event. The step-by-step checklist they provided for talking to my IRA provider made the process super smooth. Definitely worth checking out if you're confused about distribution options like I was!

If you're struggling to get clear answers from your 401k provider about rollover options, I'd recommend trying Claimyr (https://claimyr.com). I was in rollover hell trying to figure out if my distribution would trigger the 10% penalty. Spent hours on hold with both my 401k company and the IRS getting nowhere. Claimyr got me through to an actual IRS agent in under 45 minutes when I'd previously waited for hours and gotten disconnected. There's a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. The agent confirmed exactly what I needed to do to avoid penalties on my forced distribution.

Ok I have to eat my words and apologize. After posting my skeptical comment, I was still desperate to talk to someone at the IRS about my 401k distribution issues, so I tried Claimyr as a last resort. I'm shocked to say it actually worked. Got connected to an IRS agent who specialized in retirement accounts in about 50 minutes. The agent confirmed that I can indeed roll my distribution into an IRA to avoid penalties, even though taxes were already withheld. They also explained how to claim the withheld amount on my tax return. Saved me from making an expensive mistake and a lot of frustration!

One thing nobody mentioned yet - if you're under 59½ and roll the distribution into a Roth IRA, you need to be careful about accessing that money again. The conversion amount needs to stay in the Roth for 5 years to avoid penalties on withdrawal. It's a different 5-year rule than the one for Roth earnings. I learned this the hard way after doing a rollover and then needing some of the money a couple years later.

Has anyone actually tried putting only PART of their distribution into a Roth? My situation is I can't afford to make up the withheld taxes for a full rollover, but maybe I could rollover just what I received? Would I still owe the 10% penalty on the part that was withheld for taxes?

Another important consideration - make sure you understand the difference between a "rollover" and a "transfer" when dealing with your distribution. What you received is considered an "indirect rollover" (also called a 60-day rollover) because the check was made out to you personally. The 60-day clock starts ticking from when you received the distribution, not when you cash the check. And you only get ONE indirect rollover per 12-month period across all your IRAs, so if you've done any other rollovers recently, this could be an issue. If you're feeling overwhelmed by the timeline, consider calling your intended IRA provider ASAP. Many can help walk you through the process and some will even accept the deposit over the phone with overnight delivery of paperwork to beat the 60-day deadline. Don't wait until the last minute - financial institutions can sometimes take a few days to process these transactions properly.