@Ukcat85 wrote:
Ok thanks. So, call Voya and request the withdrawal and have them take out the required taxes? Then, plan on filling out something in TurboTax showing a hardship from Covid and I will not incur the 10% early withdrawal penalty? Is this seen as additional income that I will be taxed on?
Withdrawals from a traditional (pre-tax) IRA or 401(k) are always subject to regular income tax. Go ahead and let the trustee keep the mandatory 20% withholding. You will get a 1099-R at the end of the year (mailed out by Jan 31) and you will report the income and the withholding on your tax return along with all your other income, withholdings, deductions and credits. Your overall tax bill is calculated and compared to your overall withholdings and payments. If you paid more into the system than your tax, you will get a refund and if you did not pay enough into the system, you will owe the additional tax.
The difference here is that there won't be an additional 10% tax on the 401(k) withdrawal if you certify it is COVID-related (up to $100,000).
To estimate the impact of the withdrawal on your taxes, you can use the Turbotax TaxCaster.
TaxCaster tax calculator
You are probably in the 15% or 22% federal tax bracket, plus your state taxes (4%-10% depending on which state), so the mandatory 20% withholding probably won't quite cover the taxes you will eventually owe, but that depends on all your other income, withholding, deductions, dependents, and payments.
