WE are concidering cashing out one of our 401k, since i have been ill and havent worked in over a year. we feel this is our best option. what percent of taxes will they withhold?
2007-11-07 04:03:15 · 5 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
Check with an attorney or tax accountant. There may be exceptions to the normal tax penalties if you are sick and unable to work. Normally you would have to pay your usual income tax plus an early withdrawl penalty of 10%.
2007-11-07 04:07:41 · answer #1 · answered by countryguyhfc 5 · 1⤊ 0⤋
The trustee will withhold 20% for Federal and 0% for State but this usually doesn't come close to covering all the taxes due on a 401k distribution. You would have to come up with the rest when you file your return next year.
Rarely, is cashing out a 401k a good idea.
2007-11-07 12:50:16 · answer #2 · answered by Wayne Z 7 · 0⤊ 0⤋
Tough to say due to the fact that most of it will be taxed at your "marginal" tax rate. The best guess is that you will lose just a little less that half of it in taxes and penalties.
Penalty = 10%
Fed Tax rate = est 28%
State tax rate = est 8%
Total est 46%
Perhaps a loan from the 40k would be less painful and could be paid back a ittle at a time.
I hope that this helps and that you get better quickly.
2007-11-07 12:11:46 · answer #3 · answered by RunningUte 3 · 0⤊ 0⤋
They'll probably withhold 25%. But that isn't necessarily what you'll owe. You'll owe federal income tax at whatever your rate is, plus a 10% penalty on the total withdrawn. You will most likely also owe state income tax - that depends on your state.
2007-11-07 13:01:15 · answer #4 · answered by Judy 7 · 1⤊ 0⤋
Contact the IRS
2007-11-07 17:18:05 · answer #5 · answered by Anonymous · 0⤊ 0⤋