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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 37830
Experience:  Retired (mostly)
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Good Morning, I was employed with the US Air Force here

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Good Morning,

I was employed with the US Air Force here in Germany as a civilian. I resigned last month and cashed in my 401K. The Wells Fargo Representative in the states helped me submit
my paperwork. He assured me that since I was 57 the 10% Early Withdraw penalty didn't apply and that I would simply have to pay 10% to the IRS because I wasn't rolling it over.
When I received my check from WF, they had deducted 22%. Does that sound right?
I've written a letter to the office that issued my check because it's almost impossible to reach them by phone. Thank you for your help!


Where an employee separates from an employer and receives a distribution from a 401(k), and the employee is at least 55 years of age, there is no 10% additional tax penalty.

A 401(k) distribution is, however, subject to tax at ordinary income rates. A typical person has an effective annual tax rate of about 18%. The fact that you work overseas means that you may be entitled to use the foreign earned income tax exemption to reduce your tax liability for the tax year. However, a qualified employer plan, such as a 401(k) is required to withhold 20% of the distribution, regardless of the employee's circumstances.

Because of this requirement, a 22% withholding from your distribution seems about right. You may ultimately get some of that back when you file your return at year end.

Hope this helps.

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