Also we have an installment agreement with the IRS will they take that immediately from the monies of the 401K or will we still be allowed to continue with the installment agreement and retain all of the monies cashed out in the 401K?
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Unless this is a Roth 401k, your plan administrator will most likely withhold 20% of your cash-out amount for federal taxes. If you are under age 59 1/2, you will also be subject to a 10% early withdrawal penalty, unless you meet one of the exceptions listed in this IRS reference: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...
A condition of an IRS installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.
A down payment on a loan is not tax deductible.
A final consideration is that you will receive a 1099-R at the end of the tax year showing the amount of the 401k distribution as taxable income (the 1099-R will also show any taxes withheld). This added income sometimes pushes the taxpayer into a higher tax bracket.
Unless this is a Roth 401k, your plan administrator will most likely withhold 20% of your cash-out amount for federal taxes. If you are under age 59 1/2, you will also be subject to a 10% early withdrawal penalty, unless you meet one of the exceptions listed in this IRS reference: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...
A condition of an IRS installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe.
A down payment on a loan is not tax deductible.
A final consideration is that you will receive a 1099-R at the end of the tax year showing the amount of the 401k distribution as taxable income (the 1099-R will also show any taxes withheld). This added income sometimes pushes the taxpayer into a higher tax bracket.
@ssmyth You said Texas in your Q. If you really meant Taxes, and you live in a state other than Texas, also consider your state taxes. Federal + State + 10% Penalty could easily add up to 35-40% or more of the distribution.
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