Early withdrawl from 401K- Help with tax consequences?

Hi- I am a 40 year old working mom with about $25,000.00 in credit card/loan debit accumulated over the past 5 years. I am seriously considering withdrawing money from my 401K to pay off this debt. We are at the point where we are zeroing out our bank balance after each paycheck and the bills are climbing due to fees & interest rates.
Our mortgage is completely upside down (bought at $220K, owe $190K, now worth $160K) , so I can't borrow against our home. I had taken a loan against my 401K a few years ago and I still have 45 payments left there. I can't see how we'll EVER get out from under this mountain of debt in our current circumstances. We cannot save at ALL right now despite what I used to consider a decent income, (just under 90K married filing jointly with 1 dependent child).
The 401K investment company does their best to scare you away from early withdrawal but I don't know what else to do.
Can the Turbo Tax experts help me to determine what the effect of early withdrawal will be on next years' taxes and how I can best minimize or spread out, the impact? Thanks!
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    The first thing that you need to determine is whether you can withdraw from your 401k.  Many plans allow withdrawals only on retirement or separation from service.  If you can't withdraw, many plans permit loans from your 401k for hardship reasons.  They can be a problem if you can't pay them back, however, because a defaulted 401k loan is considered a taxable distribution.  If you default on your current 401k loan, for example, you would owe your marginal tax rate times the the amount of the default, and have no cash to pay it because you received the cash years ago when the loan was made.

    If you were to withdraw from your 401k, the amount would be taxed at your marginal tax rate.  For example, in the 25% bracket, you would owe 25% in income taxes on the withdrawal.

    In addition, if you are not older than 59 1/2 and do not meet a statutory hardship exception, the distribution would be considered a premature withdrawal and be subject to an additional 10% penalty tax.

    "The 401K investment company does their best to scare you away from early withdrawal "

    And, due to the reasons above, they are offering good advice.
    • I borrowed from my 401k in my previous job because my paycheck wasn't enough to pay all my bills on time and also buy food and gas. The amount was $6134.  I also borrowed 2 years ago $3800 to use as a down payment on my first house.  I paid via auto pay from my paycheckf for both loans and then found another job that pays more.  I was able to roll over about 52% of my 401k to my new 401k plan, but I could not pay back what I owed my old 401k plan.  It comes to about $9300, and I don't know what my marginal tax rate is.  my adjusted gross last year was around $25,000.  I am also a single mom and head of household.  What can I expect this penalty to cost me?
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    I'm assuming you are married because you used the term "we."  Based on your post, I would guess that your marginal tax rate is not above 15%, and could be as low as 10%.
    • Terri......If you are under 59 1/2 you will pay a 10% penalty in addition to regular income tax on it.  You will get a 1099R for it to enter into Turbo Tax.
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