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Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience:  Nine years individual income tax preparation and consulting
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I divorced 3 years ago and received 1/2 of my exs 401k in

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I divorced 3 years ago and received 1/2 of my ex's 401k in a business he no longer works for. No contributions have gone into it in years. It is in a vanguard account almost entirely invested in stocks and I would really like to be able to pull money from it. I am unemployed and taking care of my elderly sick parents and need the money to exist off of. At the moment the only income i receive is from alimony which is almost $21,000 a year. How do i go about taking money from it and if i can, what are the tax ramifications for me?
Submitted: 3 years ago.
Category: Tax
Expert:  Jacy replied 3 years ago.

Hello,

 

Assuming you rolled over the 401k money to a traditional IRA, any distributions will add to your taxable income (the alimony). You will have to contact the custodian (Vanguard) to request a distribution. If there is not enough cash in the account, you will have to sell some of the investments.

 

If you are under 59 1/2, then there will be a 10% penalty (additional tax) on any amounts you withdraw.

 

The income taxes you will pay depend on your filing status, exemptions and deductions. Do you claim your parents as dependents? Do you file Single or Head of Household?

How much money do you estimate you'll withdraw this year?

 

Thanks,

 

Jacy

 

Customer: replied 3 years ago.
Sorry it took me so long to respond. My dad had to go into the hospital..
I do not claim them as dependants as i do not support them financially.Only care for them. My filing status is now single. I am thinking to withdraw $20,000
Expert:  Jacy replied 3 years ago.

Hello,

 

Sorry to hear you about your dad. Hope he's OK.

 

So, if you are Single with no dependents, your gross income for this year would be the alimony plus the retirement distribution or $41,000. Assuming you take the standard deduction and do not claim any tax credits, then the income tax on the $20,000 withdrawal will be 15% plus the 10% penalty for a total of $5,000.

 

Thanks again,

 

Jacy

Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience: Nine years individual income tax preparation and consulting
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