topic If I cashed out a 401K I had built up through work, would that change my tax return? I know I opted to pay taxes on it at the time so I shouldn't owe anything, correct? in Retirement tax questions

If I cashed out a 401K I had built up through work, would that change my tax return? I know I opted to pay taxes on it at the time so I shouldn't owe anything, correct?

tcrobw — Fri, 20 Mar 2020 03:15:58 GMT

Re: If I cashed out a 401K I had built up through work, would that change my tax return? I know I opted to pay taxes on it at the time so I shouldn't owe anything, correct?

Bsch4477 — Fri, 20 Mar 2020 04:16:36 GMT

If you withdrew prematurely you would have a 10 percent penalty. The withdrawal is added to your other taxable income which could change your tax bracket and the amount of social security that is taxed if you get that.

Re: If I cashed out a 401K I had built up through work, would that change my tax return? I know I opted to pay taxes on it at the time so I shouldn't owe anything, correct?

VolvoGirl — Fri, 20 Mar 2020 04:21:29 GMT

Yes that could change your return a lot. You didn't actually pay the tax or 10% penalty (you pay a 10% early withdrawal penalty if you are under 59 ½). You had taxes withheld like from your paycheck. You still have to enter the whole gross original amount (before taxes were withheld) with your other income to figure out the total tax (and it may put you into a higher tax bracket) and then the withholding is subtracted from the total tax to figure your refund or tax due. The gross amount shows up,on 1040 line 4a/4c and the taxable amount on 4b/4d. The withholding will show up on 1040 line 17.