i took a hard ship with drawal from my 401 k to purchase a new home in december when i had my taxes done the agent told me i still had to pay a penalty for the withdrawal,that if i had took the with drawal from a ira i would not have to a pay penatly this reduced my refund two thousand dollers, the agent goofed up twice and did my taxes for 1/2 price but i still think they are wrong ?
2007-02-24 12:37:45 · 6 answers · asked by gear head 2 in Business & Finance ➔ Taxes ➔ United States
No he is correct, you can take an early distribution for first time home buyer from an IRA and avoid the penalty,
You can not take an early distribution from a 401K plan for 1st time home purchase
Publication 575 http://www.irs.gov/publications/p575/index.html
Publication 590 http://www.irs.gov/publications/p590/index.html
2007-02-24 12:49:22 · answer #1 · answered by Anonymous · 2⤊ 0⤋
Sorry, but you cannot take a "hardship" distribution from a 401(k) for a first time home purchase. The early distribution is fully taxable. You must pay the 10% penalty tax unless you were age 59 1/2 or older.
You can take an early distribution of up to $10,000 from an IRA for a first time home purchase and avoid the 10% penalty tax.
The "agent" didn't goof up at all, he did your return properly.
2007-02-24 20:46:49 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
They are not wrong. You should have received a disclosure about the tax before you made the withdrawal. You also could have borrowed the money from the 401k. You would have had to pay the money back, but there would not be any taxes levied.
2007-02-24 13:23:34 · answer #3 · answered by butter1944fly 3 · 0⤊ 1⤋
I did the same thing and I had to pay the penalty.. I know it suck. Its your money and your buying something that will be with you in the future but need it now. We should not have to pay a penalty for buying a house but yes you do....
2007-02-24 18:05:03 · answer #4 · answered by Anonymous · 0⤊ 1⤋
you are taxed on your 401K when you withdrawl it ( you are NOT taxed on it when you add it to the account )
you are not taxed when you withdrawl your IRA ( you were taxed on the $ when you submitted it to the account)
make sense?
2007-02-24 12:46:48 · answer #5 · answered by Mopar Muscle Gal 7 · 0⤊ 3⤋
I think they are correct but not sure. Please go for the tax filing sites. They can help you in this. bye
2007-02-24 15:46:48 · answer #6 · answered by Allan H 1 · 0⤊ 3⤋