topic 401(k) withdrawal in Retirement tax questions

401(k) withdrawal

roch1974 — Mon, 02 Dec 2019 19:58:52 GMT

I'm eligible (under 50) and am looking to make a general, early withdrawal of $25K, aware of the tax consequences.

My company already includes an amount of $31K in the form to proceed to account for taxes, fees, penalties.

I'm in the 22% tax rate bracket.

Approximately, how much will I owe come tax-return season?

Re: 401(k) withdrawal

VolvoGirl — Mon, 02 Dec 2019 20:16:35 GMT

The full amount 31,000 will be taxable to you. It will add to your income and may push you into a higher tax bracket. You also will owe the 10% Early Withdrawal Penalty on the full 31,000. Then you will get credit for the withholding taken out.

Re: 401(k) withdrawal

dmertz — Tue, 03 Dec 2019 03:40:26 GMT

The plan withheld the mandatory 20% of the distribution for taxes. If this is taxed at a marginal income tax rate of 22% and you add to that the 10% early-distribution penalty, the 20% withheld will be 12% short of covering the increase in your tax liability caused by the distribution.

I'm guessing that your gross distribution was $31,250 for the plan to be able to send $25,000 to you. Given the assumptions, your increase in tax liability from the distribution is $10,000, only $6,250 of which is covered by the withholding on the distribution. After you pay the balance due, your $31,250 distribution will have netted you $21,250 (without considering any state taxes).

Re: 401(k) withdrawal

NCperson — Tue, 03 Dec 2019 21:33:14 GMT

don't forget about state taxes.......in your determination of whether you will owe $$$ or not.