My only income is SS and I borrowed from 401K due to financial hardship, will I still have to pay taxes since my SS is only income and I'm on SS disability
2007-09-27 02:54:45 · 4 answers · asked by vmell6224 2 in Business & Finance ➔ Taxes ➔ United States
If you're on disability you're probably no longer employed by the sponsoring employer of the 401(k). As such you cannot "borrow" from the plan. Money borrowed is not taxed but distributions are; that's why tax was withheld. The distributions are fully taxable however you may be able to avoid the 10% penalty tax as you are disabled. Whether any of your SSD is taxable will depend upon your total income.
2007-09-27 03:00:09 · answer #1 · answered by Bostonian In MO 7 · 0⤊ 0⤋
If you were able to take out a loan on your 401k, it would not be taxable. So if you know taxes were taken out, it is not a loan.
Because of your disability which qualifies you for SSDI, your tax document for the distribution of the 401k, a 1099R, should show a distribution of of "3" in Box 7. This will exempt you from the 10% penalty.
The amount you took out of the 401k is taxable income. I would need to know how much you took out of the 401k, the amount of your SSDI, and your filing status to tell you how much tax you will pay. In addition to the income tax on the 401k, you might pay tax on some of your SSDI.
Tax on part of the SSDI will be owed if your 401k distribution plus 1/2 of your SSDI is more than $25,000 (or $32,000 if married).
2007-09-27 10:40:07 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
They shouldn't have withheld taxes if it's a loan, just if it's an actual withdrawal. Depending on the amount withdrawn, you probably won't owe tax if your income including the withdrawal is under the limit to have to pay income tax - the withdrawal is considered taxable income. You might owe the 10% early withdrawal penalty unless you are totally and permanently disabled in which case you don't - if you are on SSDI you might meet that exception to be able to withdraw early..
2007-09-27 11:51:37 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
Yes, will will still have to report it on a tax return seeing you had taxes withheld. It also depends on what your overall income for the the year was ,age and filing status.You might be taxed on your SSDI if what you took out of 401K MADE YOU GO OVER THE LIMIT
2007-09-27 10:03:36 · answer #4 · answered by kew214 1 · 0⤊ 0⤋