I recently got divorced. I have to sign over 1/2 of my 401k to her. I am thinking of asking her to buy her out less any taxes she would have been charged. What percentage is taken out of a 401k when removed. I am trying to think of an offer to give her. The 401k is not alot. (24,000) She gets 12k. Any Ideas?
2006-08-08 03:25:30 · 6 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Before I give advice, I was wondering if you have a QDRO (qualified domestic relations order) in place. If so, you may already have some protection from tax implications on this. Check with your attorney to see if he set up the QDRO. Also, it seems to me that it could be possible to handle this an entirely different way. Since the main idea is to divide your assets in half, couldn't the decree have been set up such that you would retain 100% interest in the 401(k) and she would receive cash? It seems like kind of sloppy planning to have either of you end up with tax implications from this. Some states have certain laws that preclude this sort of thing, but check with your attorney to see if it's too late for the QDRO or dividing the assets differently.
Good luck!
2006-08-08 16:01:43 · answer #1 · answered by SuzeY 5 · 0⤊ 0⤋
I have a funny feeling you can't buy her out. Not sure about that, but it seems like the IRS might not like her "gifting" you her part of the 401k without a taxable transaction taking place.
That is the first thing I'd check.
2006-08-08 03:29:49 · answer #2 · answered by diamondspider 3 · 0⤊ 0⤋
Good news...the $12 K was paid directly to her and she gets own 1099R from pension. Zip taxable to you. All taxable to her when received.
Bad news...you contact pension and get money YOURSELF to give her. then you get own 1099R that is taxable to you plus a 10% ($1200.00) penalty if you are under 59 1/2. Zip taxed to her. She and her lawyer are ROTFL at you. Wrong way to do this. Should have called 800-829-1040 for advise BEFOREHAND.
2006-08-08 08:33:47 · answer #3 · answered by Ellie 2 · 1⤊ 0⤋
You'll be taxed roughly 30%. If you have own a home, you might be better off accessing your equity with a refinance, home equity line or second mortgage rather than taking the tax penalty.
2006-08-08 03:30:56 · answer #4 · answered by Anonymous · 0⤊ 0⤋
I know someone who took out there 104K early. It was taxed about 40% and penalties for early withdrawal. Buy her out. I think she should have to wait. I would have had to with my husbands.
2006-08-08 03:30:54 · answer #5 · answered by Anonymous · 0⤊ 0⤋
taxed at your regular rate for the year and income recei ved
2006-08-08 03:29:13 · answer #6 · answered by msqtech 7 · 0⤊ 0⤋