topic Overpaid taxes 40% for cashing out 401k. Turbo says we only should have paid 10% or 25% Which is it? in Retirement tax questions

Overpaid taxes 40% for cashing out 401k. Turbo says we only should have paid 10% or 25% Which is it?

bnb3 — Sat, 01 Jun 2019 15:22:40 GMT

The TurboTax "10 or 25%" thing is with reference to the W...

BobinCT — Sat, 01 Jun 2019 15:22:42 GMT

The TurboTax "10 or 25%" thing is with reference to the WITHHOLDING that would be taken, NOT the ultimate tax.

When you withdraw from your 401(k) before the age of 59 1...

MinhT — Sat, 01 Jun 2019 15:22:44 GMT

When you withdraw from your 401(k) before the age of 59 1/2, the amount withdrawn is subject both income tax and the early withdrawal penalty.

The early withdrawal penalty is 10% of the amount withdrawn. Income tax on the the amount withdrawn depends on your tax bracket. If you are at the 28% tax bracket then you pay 28% in tax, making it a total of 38%.

Please read this TurboTax article for more information:

https://blog.turbotax.intuit.com/income-and-investments/401k-ira-stocks/what-you-need-to-know-about-...