401(k) withdrawal

Forum|Forum|6 years ago
December 2, 2019
2 replies
6 views

I'm eligible (under 50) and am looking to make a general, early withdrawal of $25K, aware of the tax consequences.

My company already includes an amount of $31K in the form to proceed to account for taxes, fees, penalties.

I'm in the 22% tax rate bracket.

Approximately, how much will I owe come tax-return season?

VolvoGirl

Level 15

The full amount 31,000 will be taxable to you. It will add to your income and may push you into a higher tax bracket. You also will owe the 10% Early Withdrawal Penalty on the full 31,000. Then you will get credit for the withholding taken out.

dmertz

Level 15

The plan withheld the mandatory 20% of the distribution for taxes. If this is taxed at a marginal income tax rate of 22% and you add to that the 10% early-distribution penalty, the 20% withheld will be 12% short of covering the increase in your tax liability caused by the distribution.

I'm guessing that your gross distribution was $31,250 for the plan to be able to send $25,000 to you. Given the assumptions, your increase in tax liability from the distribution is $10,000, only $6,250 of which is covered by the withholding on the distribution. After you pay the balance due, your $31,250 distribution will have netted you $21,250 (without considering any state taxes).