I will owe at least $2000.00 this tax season because of taking money out of my 401K and receiving a 1500.00 penalty tax. Money is tight and I will only be able to raise about 1000.00 before April 15th. What do I do?
2007-12-26 22:41:10 · 6 answers · asked by girl_in_vernon 3 in Business & Finance ➔ Taxes ➔ United States
Pay as much as you can by the filing deadline. The IRS will bill you for the balance. Then call them and work out a payment plan.
This isn't at all unusual and there's no need to panic. The IRS will take payments. Just stick to your end of the agreement and everything will be fine.
2007-12-27 00:16:35 · answer #1 · answered by Bostonian In MO 7 · 1⤊ 0⤋
One reason we have deductions from pay and IRA and 401K withdrawals is to avoid owing too much at tax time. If you withdrew from the 401K and did not have the tax withheld, you did not plan well. If you withdrew early, you are paying a penalty. there are several options:
1. Your tax liability may be less than you think. Prepare a preliminary tax return to determine what you might owe.
2. Save as much money as possible until April 14.
3. You may be able to borrow money from your bank to pay the tax, and pay it as late as possible, like April 14.
4. Draw out more from the 401K to pay the tax and another penalty, and this time plan ahead.
5. Talk with the IRS about making payments over time. They can make arrangements with taxpayers.
2007-12-27 07:36:45 · answer #2 · answered by Anonymous · 0⤊ 1⤋
Make payment arrangements with the IRS. Next time leave your 401k plan alone it is not a regular savings account. Did your 401k Plan Administrator talked to you about tax consequences regarding a withdrawal?
2007-12-27 08:19:02 · answer #3 · answered by Gary 5 · 0⤊ 0⤋
Didn't they take that money out before you were given the proceeds of your 401K? You can make arrangements with the IRS to make payments. You must have also paid in from your wages, see an accountant and they may be able to help you.
2007-12-27 06:49:27 · answer #4 · answered by Diane B 6 · 0⤊ 0⤋
Pay what you can, and if you can't pay it all, the IRS will set up a payment plan for you. You'll pay interest of course, but won't be in trouble over it.
2007-12-27 09:04:37 · answer #5 · answered by Judy 7 · 0⤊ 0⤋
because you have 401k they wont let you pay it off, why cant you take it out of your 401k?
if you were bankrupt the taxation department would let you pay it off, only bad thing about claiming bankruptcy is its on your record for 7 years (in australia is 7 yrs) and u cant get any loans or nething for that time
2007-12-27 06:51:51 · answer #6 · answered by **Jemma** 2 · 0⤊ 2⤋