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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I am in the most critical of positions, my satellite office

Resolved Question:

I am in the most critical of positions, my satellite office is being closed, I have a 401k loan for 35k I am paying down , I was intending to pull out another loan in annually to cover kid going into college, if I lose my job ,and the loan is counted as a disbursement ,how much will I be resposible for?, I am over 57 years old so I believe the 10% penalty is waived.
Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

Megan C :

Hello, and welcome to JustAnswer.com. How are you today?

Megan C :

I am sorry to hear about your situation. I realize that you are wondering what your tax would be on the $35,000 loan that you took from your retirement fund, if you are separated from your employment.

Megan C :

I hate to be the bearer of bad news but you are under 59 1/2, so you cannot take penalty free withdrawals from your retirement accounts

Megan C :

You would be subject to the 10% penalty

Megan C :

You are also subject to income tax on that amount. So, you will owe ordinary income tax on the outstanding balance of the loan.

Megan C :

If you tell me more about your situation, I can more accurately calculate your income tax liability

Megan C :

What is your filing status? What is your other income? How many dependents do you have?

Megan C :

Let's say for instance you are in the 15% tax bracket. You would owe $3,500 as a penalty and $5,250 as income tax.

Megan C :

If you are in the 25% bracket, you would owe $3,500 as a penalty and $8,750 as taxes.

Megan C :

I can't tell you an exact amount without knowing your tax situation.

Customer: Actually on an 18% tax bracket, married filing jointly total of 4 dependents.
Megan C :

Do you mean 15% or 28%? There is no 18% bracket.

Customer: what would appen if I just asked for a total disbursement of my 401k the current total I have it's 310k what would I be left with, after penalty and taxes, going to be pretty difficult finding a job at 57.
Customer: Sorry 15
Megan C :

Okay. If you took out $310,000 that would push you into a higher tax bracket for sure. What is your other income the year of the disbursement

Customer: About 115k
Megan C :

okay. If you are married, with 4 dependents and have $115,000 of income from wages, then $345,000 of 401(k) withdrawal your tax would be $124,950

Megan C :

Your marginal tax rate would be 35%

Customer: Whew,got it ,thank you so much!
Megan C :

You're welcome

Megan C :

I'm sorry it's so much.

Megan C :

Is there anything else I can assist you with today?

Megan C :

If there's nothing else I can assist you with today, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Finance Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thanks, Joe for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today.

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Megan C
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Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level