An indirect rollover can result in taxes and penalties if not handled properly. In an indirect rollover, a 20% withholding tax applies, and individuals have 60 days to use the funds without tax or penalty before rolling them into an IRA or another retirement plan. If the deadline is missed, the entire amount of the indirect rollover is subject to tax and a 10% penalty if the individual is under 59 1/2. To avoid these consequences, individuals should deposit the funds into the new retirement account within the specified period.