Hi CathyM10,
Thank you for reaching out to Intuit's TurboTax Ask the Experts Event. Usually when you withdraw money from a 401K plan prior to being 59 1/2 years old you will need to pay taxes on the money withdrawn plus a 10% penalty. The way to estimate the taxes that you would owe is to add the amount withdrawn from your 401K plan to your income for the year and look at the income tax tables to determine what tax bracket you would be in. You did mention that you withdrew this money to "cover major expenses" so I don't know if your withdrawal would classify as a hardship withdrawal. Here are the type of expenses that allow you to classify this withdrawal for hardship purposes:
- Home-buying expenses for a principal residence
- Up to 12 months’ worth of tuition and fees
- Expenses to prevent being foreclosed on or evicted
- Burial or funeral expenses
- Certain expenses to repair casualty losses to a principal residence (such as losses from fires, earthquakes, or floods)
If you withdrew this money for hardship purposes you would still need to pay taxes but may avoid the 10% penalty.
Have a great day!
AnthonyC_CPA
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