401k withdrawals, If I take a early withdrawal I understand that the plan will take 20%.?

Question

And then another 20% by Uncle Sam however when requesting the withdrawal should I request for them to take an additional 20% at the time of withdrawal so that I wont have to worry about it on April 15?

Answer 1

The plan does NOT take 20%, they must withhold 20% from the distribution amount and pay it to the IRS. Your 1099-G will reflect that withholding amount.

You can ask them to withhold more than 20% but they do not have to do so. The IRS recommends that you either adjust your withholdings on other income subject to withholding or make one or more estimated tax payments using Form 1040ES to cover the additional tax liability.

The actual tax liability will depend upon your tax bracket. Add the 10% penalty tax to your tax bracket to see what the total percentage is. For example, if you're in a 25% tax bracket, your total bite on the early distribution will be 35%. If you're in a 15% tax bracket, your total bite will be 25%.

Answer 2

I don't know what kind of plan you are in that can take 20% of your money. You are probably mistaken about that. If you are 100% vested in your plan the money is yours and the plan does not take any of the money for early withdrawal. You are correct that the IRS takes a penalty and estimated taxes out of the amount you withdraw early. Check with your plan administrator for exceptions to the penalty - some plans have hardship withdrawal provisions that may allow you to withdraw without paying the penalty. I don't know of any way to avoid paying the taxes though.

Answer 3

I don't know about that, but the government will kill you with taxes.