Hi, I would like to know that with a 401k account and still working at the age of 53, if a person wants to close it and liquidate it, what penalty does he pay for the premature closing of the 401k account for use in personal purposes. Thanks
Country/State/Province of question: MD
Thanks for your question! I would love to assist you tonight with your inquiry.If you are 53, you will pay a penalty of 10%If you wait until age 59 1/2, you won't have to pay the 10% early withdrawal penalty. Under both circumstances you will also be responsible for income tax at your marginal rate. Thank you for your question. Please take a moment to rate my service as "Great Service" so I can be compensated for assisting you today. If you need further clarifications, please hit the "Reply" or "continue conversation" button.
TN CPA with Master's degree from Ole Miss
Thanks, XXXXX XXXXX the early withdrawal reported to IRS. is it straight forward, such as in turbotax,,,or I need an accountant to help me with the processing.Thanks,
Well, when you withdrawal the money, the company holding the funds will automatically withhold the 10% penalty plus a 20% federal tax withholding. Then you will enter this information in TurboTax when you go to do your taxes at the end of the year. It should be fairly straightforward. I prefer using HR Block at home to TurboTax, I find that people have a lot less difficulties with their product, plus you can have a "second glance" or something like that where a tax pro looks over your return for you and helps you out in that respect. However, i don't endorse HR Block it's just a product I've used personally when I haven't been at a job where I have access to tax prep software. Thanks!