topic I am making an early withdrawal from an old employer 401K plan. Can I pay the taxes associated with the withdrawal as a one-time payment before the end of the year? in Retirement tax questions

I am making an early withdrawal from an old employer 401K plan. Can I pay the taxes associated with the withdrawal as a one-time payment before the end of the year?

thekid972 — Thu, 15 Oct 2020 04:32:37 GMT

I know that I can request taxes to be withheld at the time of the early withdrawal. However, I wish to receive the entire check amount of the withdrawal first, then separately pay the taxes associated with the withdrawal sometime before the end of the tax year. How would I go about making that one-time payment to the IRS?

Re: I am making an early withdrawal from an old employer 401K plan. Can I pay the taxes associated with the withdrawal as a one-time payment before the end of the year?

macuser_22 — Thu, 15 Oct 2020 04:45:14 GMT

You can do that but it makes it more complicated. Withholding is deemed to have been in even payments through out tax year reguardless of when the distribution actually occurred. A one time estimated tax payment must be in the estimated tax quarter that the distribution occurred. Then you must file a 2210 form selecting the annualized method to show that your income was uneven during the year, otherwise there would be an underpayment penalty.

Re: I am making an early withdrawal from an old employer 401K plan. Can I pay the taxes associated with the withdrawal as a one-time payment before the end of the year?

dmertz — Fri, 16 Oct 2020 11:30:12 GMT

The law requires that a minimum of 20% be withheld for taxes. You cannot decline this amount of withholding unless the distribution is directly rolled over to another qualified retirement account like an IRA, paid directly to the new account, not to you personally.

Re: I am making an early withdrawal from an old employer 401K plan. Can I pay the taxes associated with the withdrawal as a one-time payment before the end of the year?

Opus 17 — Tue, 20 Oct 2020 21:28:09 GMT

You would make a payment at www.irs.gov/payments. There will be a similar web site for your state taxes.

The 20% mandatory withholding won't be enough if you are in the 22% or higher tax bracket, and you may owe the additional 10% penalty for early withdrawal depending on your age, so you will probably need to pay additional taxes either at the time of the withdrawal or calculated on your tax return. Remember that no matter what you pay now, it is only an estimate, and the withdrawal must be included on your tax return to calculate the final actual tax owed. If you overpaid your estimate, you will get the difference as a tax refund.