Hello!
I took an early withdrawal from my 401a (the full amount ($121,044) with no special circumstances, I am retired at 52 ), and did not roll it over to an IRA, but deposited it into my personal bank account.
My questions are:
1. My 401a plan distributor took 20% for federal taxes, is that the normal percentage to take?
2. After entering my 1099R for my 401a on turbo tax, it said I owed additional $8,251 more. Why is that?
3. Is there another penalty fee associated with this (aside from the 20%) from the IRS?
Thank you for your help!
1. Most plan administrators would withhold 20% of the distribution for Federal taxes. This withholding is only a 'down payment" for the taxes you owe on the distribution and not the actual taxes owed.
2. As this is a distribution before age 59 1/2, you are liable for an early distribution penalty of 10% of the amount distributed. Also the distribution when added to your other income may have put you in a higher tax bracket. This is why you owe additional taxes.
3. As I said previously, the 20% tax withheld is only a down payment. On your distribution, you have pay income taxes at your marginal tax bracket plus an early distribution penalty of 10%.
1. Most plan administrators would withhold 20% of the distribution for Federal taxes. This withholding is only a 'down payment" for the taxes you owe on the distribution and not the actual taxes owed.
2. As this is a distribution before age 59 1/2, you are liable for an early distribution penalty of 10% of the amount distributed. Also the distribution when added to your other income may have put you in a higher tax bracket. This is why you owe additional taxes.
3. As I said previously, the 20% tax withheld is only a down payment. On your distribution, you have pay income taxes at your marginal tax bracket plus an early distribution penalty of 10%.