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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11605
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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This is a tax question . My father recently

Customer Question

This is a tax question for California. My father recently passed and would like to know if I should cash out on his 401K since they automatically take out 20% for taxes. Then, once i receive the lump sum, will I be taxed again for additional income in
my annual taxes? So will I get double taxed? What if i roll it over into a 401K and need to take out the money before retirement. Will the penalties for early withdrawal and annual taxes be less than taking the lump sum? I need to send this information today
to the respective financial firms. Thank you!
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.
Hi,No you will not be taxed twice ... the money that they take out for taxes is WITHHOLDING (just like your W-2 withholding)..Now...
Expert:  Lane replied 1 year ago.
Is you do anything BESIDES rolling it to an IRA or your own workplace 401(k) the amount of the distribution is simply added to yur taxes for purposes of figuring your taxes in April..So that withholding offsets that amount added to your income for tax purposes
Expert:  Lane replied 1 year ago.
If you roll it to an IRA, there's no tax - so no need to wthhold ... ... Only if you actually withdraw the money FROM the 401(k) .. (or from the IRA after you roll it) will that additional taxable income be added for the year you wkthdraw it
Expert:  Lane replied 1 year ago.
SO, lets say that it's 50,000, and you made 50,000 at your job. .If you withdraw (not roll) it, your taxable income will be 100,000..For someone married filing jointly,18,450 to 74,900 is at 15% and then next 74,900 to 151,200 is taxed at 25%.SO a 20% withholding would be just about right to cover the taxes
Expert:  Lane replied 1 year ago.
Make sense? ... Further questions?
Expert:  Lane replied 1 year ago.
OK, I still don’t see you coming into the chat here … I’ll move us to “Question and Answer” mode … (We can still continue our discussion there, just not in real-time chat) … This way JustAnswer won’t charge you for for additional chat time and we can continue the dialogue.
Expert:  Lane replied 1 year ago.
If this HAS helped, I would appreciate a positive rating (using the stars or smiley faces on your screen)… That’s the ONLY WAY I'll be credited for the work here, Thanks!
Expert:  Lane replied 1 year ago.
Hi,
I’ve moved us to the Q&A mode so JustAnswer won’t charge you for more Chat time.
Please let me know if you need more here.
Lane