401k Withdrawn Due to Under $1k Limit?

I took a leave of absence from my job last year due to family issues. Recently, I was going through my old mail and found 2 checks issued from the investment company. It appears that they closed down the account due to it being under the $1,000 limit. My 1099 form shows the gross distribution to be $1,175 and the total amount of the checks totals $916.

I am aware that I was accessed a 10% early withdrawal fee. I was wondering if there is anything I can do since the withdrawals were done without my knowledge/consent or is it too late. Should I just cash the checks and file my taxes?

A lot of plans have provisions to automatically distribute balances under a certain threshold when the participant is no longer with the company. That information could have been found in the Summary Plan Description that you should have been provided when you became eligible.

The difference between the amount of the gross distribution and the two checks is NOT the early withdrawal penalty, but rather a mandatory 20% withholding for distributions payable directly to the participant although that leaves another $25 unaccounted for.

If you haven't already contributed to an IRA for 2007 (and you have some earned income), open one and deposit the checks there and it will have the same end result as if you had done a rollover (aside from the withholding).

Once its cashed out, its usually too late. You usually have options before they are automatically distributed to roll them over into a IRA.

You have 60 days from taking the distribution by check to contribute it to a traditional IRA, with no tax consequences. So yes, cash the checks and then you have 60 days (but before you file your taxes) to put that money into a new IRA, and you can kick in more to make it the original $1175, and get refunded the tax they automatically took out.

Keep all documentation in case the IRS thinks you waited more than 60 days. You might want to try to verify if the tax code says 60 days from depositing your check, or 60 days from the money being disbursed -- not sure.