401k withdrawal tax rate

[tonynezat]

Cares act 401k withdrawal tax liability

[macuser_22]

If you qualify for a Corona virus related distribution, then there is no additional early distribution penalty and you can replace the money over a 3 year period (treated as if a rollover) to avoid tax, otherwise it is normal taxable income over 3 years.

[hector4]

hi I'm planning to withdraw money from my 401k do to the corona virus.

my question is how much do I need to put aside for federal and state taxes sense I leave in Oregon.

[DoninGA]

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@hector4 wrote:

hi I'm planning to withdraw money from my 401k do to the corona virus.

my question is how much do I need to put aside for federal and state taxes sense I leave in Oregon.

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The 401(k) plan administrator will withhold 20% of the withdrawal for federal income taxes.  You have to request the administrator withdraw state income taxes at the time you make the request for withdrawal.  For Oregon suggest you use 9% for state income taxes.

[dmertz]

The CARES Act waives the otherwise mandatory 20% withholding on a rollover-eligible distribution, so you can generally specify whatever amount of withholding makes sense for your particular tax situation, even as little as $0 if doing so would not result in a tax underpayment penalty.  However, the qualified retirement plan is not required to allow less than 20% withholding as permitted by the CARES Act, so check with the plan.

While not subject to any 10% early-distribution penalty, a Coronavirus-Related Distribution to a qualified individual is subject to ordinary income tax at the individual's marginal tax rate, taking into account all of the individual's income and deductions.  The amount of a CRD that will be taxable on your 2020 tax return will depend on whether you chooses to include the entire amount in 2020 or to include it in equal parts in 2020, 2021 and 2022.  It also depends on if and when you repay any amounts of the distribution.  Taxes withheld from the distribution will be credited on your 2020 tax return, with the amount in excess of the your 2020 tax liability either being refunded or applied to 2021 as you indicate on your 2020 tax return.