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I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

 
7 Replies
rjs
Level 15
Level 15

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

What is "O KY"? Are you talking about federal tax or state tax that was withheld from your 401(k) withdrawal? If it's state tax, what state is it? Kentucky? Is that what "KY" is? Kentucky income tax is only 5%. The 20% withholding sounds like federal tax, not state.


Income tax is not calculated separately for the 401(k) withdrawal. Your income tax is calculated on your total income for the year. The tax withheld from the 401(k) withdrawal is combined with any tax that is withheld from other income, and the total amount of tax withheld from all sources is applied to your total tax. That includes tax withheld from your pay or any other income. To estimate how much tax you will owe, you have to estimate your total tax for the year and the total amount you will have withheld for the year. You might not need to make any additional payment.


Was this an early withdrawal? If so, you will have to pay a 10% penalty in addition to the regular federal income tax. You have not indicated that you have done anything that would avoid the tax or the penalty. What did you do with the money?

 

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

To avoid a federal penalty you need to pay enough into the system (from withholding and other payments) that you either:

a. owe less than $1000 when filing

b. paid more than 90% of what you owe for 2022

c. paid at least 110% of your tax liability for 2021.

 

You can try using the TaxCaster to estimate your tax due.  It will be close enough even though it is still programmed for 2021.  Make sure to answer you got the full stimulus ($1400 per person) so it doesn't reduce your tax owed for that. https://turbotax.intuit.com/tax-tools/calculators/taxcaster

 

Payment would be due April 15, June 15, or Sept 15, depending on when you withdrew the money.  If you over-pay the estimate, you will get the difference back as a refund.  You can pay on the IRS web site, select "2022 estimated taxes" as your reason.  www.irs.gov/payments

 

The rules and deadlines for Kentucky state income tax are the same as for the IRS, the rate is 5%, you can pay here if you did not have withholding.

https://epayment.ky.gov/EPAY

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

I bet O KY was supposed to be "Only....."

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

O KY...maybe means....Okay, 20% was held for taxes.

Hal_Al
Level 15

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

Q. How do I pay the balance? Partial payment now or wait until end of the year

A. Simple answer: wait until end of the year. That is, wait until you file your 2022 tax return, in early 2023. 

 

There are a couple of reasons for that answer:

- 20% is probably enough.

- No underpayment penalty will be due as long as your total withholding for 2021 was greater than your 2020 tax liability

TomD8
Level 15

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

You may want to make an estimated tax payment to your state, if your state taxes retirement income and no state tax was withheld.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

I withdrew my 401k this year. O KY 20 per cent was held for taxes. How do I pay the balance? Partial payment now or wait until end of the year

 20% is probably enough.

 

Maybe not, if OP also owes a 10% early withdrawal penalty, or is collecting Social Security benefits.

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