Please help with 401k questions?

Please help with 401k questions?
My mom's work has a 401k plan and she's been putting money in for quite awhile now. About a a year ago the company switch owners. My mom did some paper work to do a rollover. I believe she wanted a direct rollover but they sent home a check back in november 2008. however my parents don't speak english so they didn't know they recieve the check. We we're just going over the paperwork today and they found the check in one of the envelopes, over 5 monthes late. So i've been looking up online and appearantly if the check isn't depositted to the new 401k plan within 60 days their are some penalties. what are they. any sugestions on what we should do now? Also my mom originally had about 16000 dollars in the 401k. they send home a check for about 13000. Where's the 3000? the check is made to her new employers but for the benefit of my mom. She's under 59. so did she pernamently lose the 20% the 3000? or is there anyway to get that back? What would happen if she deposits the check into the new 401k now?


Answers:

Ryan M:  The 3000 was taken out for income tax purposes. This is pretty standard and you WOULD HAVE gotten the money back had your mom deposited the check within 60 days. Since the check was not deposited, the check is considered to be a distribution and subject to a 10% penality PLUS ordinary income taxes (State & Federal) on the entire $16,000 for the year in which it was received. There is nothing you can really do about it now, since you are WELL past the 60 day mark.
2009-04-22 14:13:05
bud68:  Too late to do anything about it now.
2009-04-22 14:20:10
Madoff:  It's cash in her pocket. Nothing she can do now....
2009-04-22 14:45:47
Chosen Answer
muncie birder:  This is an extremely difficult question to answer. Since the check was not made out to her but to her new employer, I think she should take the check to the employer, but someone familiar with tax law really needs to answer the question. Another possibility is to claim that the check was lost in the mail and never received and ask for another. That might get you out of the taxes and penalties problem.
2009-04-22 15:29:16
MVD34:  I agree that the correct answer is to go back to the original employer and plead lost check -- You didn't know you had it and were expecting a direct rollover. See if they will work with you.
2009-04-22 15:48:52