Taxes Q & A- I changed jobs and my old employer

I changed jobs and my old employer sent me a check for my 401(k) money withholding 20% for Federal Income Tax. I rolled over the distribution to my 401(k) plan at my current employer within 60 days. Since money was withheld from the 401(k) distribution, do I have to include that money as income?

If the amount rolled over was the net amount, that is, the amount of the distribution less the tax withheld, then the 20% withholding amount not rolled over is included in gross taxable income and may be subject to a 10 percent additional tax on early distributions from qualified retirement plans. Use Form 5329 (PDF), Additional Taxes on Other Qualified Plans (including IRA's), and Other Tax-Favored Accounts, to report the penalty.

If the amount rolled over was the gross amount, that is, you added an amount equal to the withholding to the amount that was rolled over, you would not add any of that amount to gross taxable income this year or owe a 10 percent additional tax on early distributions from qualified retirement plans.

References:

Publication 575, Pension and Annuity Income
Publication 590, Individual Retirement Arrangements (IRAs)
Form 5329 (PDF), Additional Taxes on Other Qualified Plan (including IRA's), and Other Tax-Favored Accounts
Form 5329 Instructions, Additional Taxes on Other Qualified Plan (including IRA's), and Other Tax-Favored Accounts
Tax Topic 558, Tax on Early Distributions From Retirement Plans
Tax Topic 412, Lump-Sum Distributions