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CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3738
Experience:  over 40 years experience in tax matters
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Hello: I have a 401K tax question. My earnings information

Customer Question

Hello:

I have a 401K tax question. My earnings information for 2011 is as follows:
$85,345.00 earnings for 2011
$19,725.85 "defaulted" 401K loan to be treated as income.

I am considering withdrawing the remaining $22,621.35 in 2011 vs. 2012. Is there advantages to withdrawing in 2011 vs. 2012 and what is my estimated tax liability under both scenarios?

I am head of household with 5 dependents and currently live in the State of New Hampshire
Submitted: 2 years ago.
Category: Tax
Expert:  CGCPA replied 2 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

The estimated tax on the 401(k) defaulted loan is 15% or $2960 plus, if you are under 59.5 years old, another 10% or $1973 for the early distribution penalty. The remainder of your tax should be covered by withholdings.

I would avoid taking the additional amount in the plan until 2012 (early January is the same as the end of the year 2012). It may push your into a higher tax obligation since it will also serve to limit some of your itemized deductions thereby increasing tax more than just the regular rates of 15% and perhaps 10%.

Customer: replied 2 years ago.

Hello,

 

Thanks for your quick reponse and advice. I typically get back between $8K & $10K between state & federal with all of my deductions and earnings withheld.

 

Would you estimate this amount to "break even" for the 2010 year?

Expert:  CGCPA replied 2 years ago.
If you take no additional money from the 401(k) you will still get a refund, but about $5,000 less than normal. If you take the additional money you should be about a break even.
CGCPA, CPA
Category: Tax
Satisfied Customers: 3738
Experience: over 40 years experience in tax matters
CGCPA and 5 other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you for the confirmation and your time.
Expert:  CGCPA replied 2 years ago.
You are quite welcome. Please feel free to return any time we can assist you.

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