turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

lacie308
New Member

Why are we being asked to pay taxes twice for pulling out of our 401ks early?

 
Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

2 Replies
KrisD15
Employee Tax Expert

Why are we being asked to pay taxes twice for pulling out of our 401ks early?

When funds are pulled early from a retirement account, first there is income tax on the income, then there is a penalty tax for making a withdrawal early. 

 

There are a few exceptions to the penalty, such as using it for Medical expenses. The number of exceptions for 401k is less than for an IRA. 

 

According to the IRS:

"Generally, early withdrawal from an Individual Retirement Account (IRA) prior to age 59½ is subject to being included in gross income plus a 10 percent additional tax penalty. There are exceptions to the 10 percent penalty, such as using IRA funds to pay your medical insurance premium after a job loss. For more information, see Hardships, Early Withdrawals and Loans."

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
ee-ea
Level 15

Why are we being asked to pay taxes twice for pulling out of our 401ks early?

The money that was taken when you withdrew was withholding.  It is just like the money taken from a pay check to pay taxes.

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies