If you cash out a 401k plan, do the federal taxes and penalty come out before you receive a check or will you have to report it when you file your taxes?
2007-03-27 14:05:48 · 7 answers · asked by supersarahs23 1 in Business & Finance ➔ Taxes ➔ United States
They will probably take out some withholding, but that might or might not cover what you end up owing. You'll get a 1099-R for the amount you withdrew, and will have to report that when you file your taxes and calculate the actual tax due, including a 10% penalty on the total withdrawn if you are under age 59-1/2.
2007-03-27 14:13:31 · answer #1 · answered by Judy 7 · 2⤊ 0⤋
If you take out a full distribution and you are under age 59 1/2 then the withholding is a mandatory 20%. You add that amount to the withholding that you had taken from your paycheck. The 10% extra tax is applied when you file your taxes up in the other taxes section of the 1040.
BUT, if your distribution is under $200 then they will withhold nothing from the check.
AND, lastly...if you're taking a hardship withdrawal or a distribution after age 59 1/2 and it's not a full distribution then the withholding is optional. You dictate how much you want withheld. If you don't tell them, they will withhold 10%.
2007-03-30 04:03:28 · answer #2 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
It all depends your your financial institution. It is up to them. When you recieve your 1099 from them, look in the box that says, federal income tax paid. That will tell you if they paid it in for you. Either way, if you take it out early, and do not roll it over right away, you will be paying taxes on it. If you are taking it out when you should be taking it out, then you may pay minimal taxes, but it is usually already done for you. Good Luck
Ask your 401 K manager about this. too, or the boss at work for a contact, ie his accountant to explain it to you.
2007-03-27 17:08:59 · answer #3 · answered by Chris 3 · 0⤊ 0⤋
If you are under 55 you will pay a penalty for early withdrawal and in most cases taxes. These are deducted from the savings before the check. If you are rolling over into a qualified account, this may be different, I'm not sure. I think you don't have to pay taxes until withdrawn without roll over.
And yes, since the savings are normally not taxed when withheld from your wages, you will have to report them on you annual tax return.
2007-03-27 14:27:28 · answer #4 · answered by sissyd 4 · 0⤊ 2⤋
It comes out before they send you a check. You will recieve a 1099-R telling you how much the 401k was worth and how much was taxable, and how much was taken out for taxes. You send a section of the 1099-R in with your tax return, just like a W-2.
2007-03-27 14:20:41 · answer #5 · answered by jeff410 7 · 0⤊ 2⤋
Trust Judy.
2007-03-27 16:19:30 · answer #6 · answered by CarVolunteer 6 · 0⤊ 0⤋
Usually it comes out before your check , but either way, but it hurts real bad.
2007-03-27 14:14:18 · answer #7 · answered by Anonymous · 0⤊ 2⤋