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tax-doctor, Tax Preparer
Category: Tax
Satisfied Customers: 637
Experience:  Federal, State and local income tax preparation
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I pay an extra $1400 a month in Tax (above the amount deducted

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I pay an extra $1400 a month in Tax (above the amount deducted in my paycheck). I'm a high earner and usually get most of it back when I file my taxes each year. This year I plan to empty out a dormant 401K (pay the penalties & taxes due on it) and get a check for approx $70K. My question is when is the best time to do this - this year or wait until next year? My concern is that I might lose my tax return check if I cross over to a hight Tax bracket. help!
Submitted: 1 year ago.
Category: Tax
Expert:  tax-doctor replied 1 year ago.
Hello, my name is XXXXX XXXXX I'll be happy to assist you with your question. If it's possible to split in half, 50% this yr & 50% next yr, that would workout best. But, if not possible, I'd say all this year, since tax rates are expected to go up next year. If you need additional assistance on this topic please ask and I'll follow-up, otherwise, if satisfied with my answers, please rate them OK or higher at this time, so that I'm pd for answering them. Thank you!
Customer: replied 1 year ago.

So if I do it all this year - will it affect my tax refund check?


 

Expert:  tax-doctor replied 1 year ago.
yes, unless you have the financial company which holds this 401k acct withhold taxes from this distribution. This should cover the extra taxes due, but not the 10% penalty, so your refund ck with be approx. $7000 less.
Customer: replied 1 year ago.


The financial company will withhold the taxes and the 10% penalty before writing me a check for the rest. The 401K is at $131K at the moment, I'm only going to get back about $70K check from them. So in light of this will my tax refund check still be less?


 


thanks.

Expert:  tax-doctor replied 1 year ago.

No, and you're welcome!

tax-doctor, Tax Preparer
Category: Tax
Satisfied Customers: 637
Experience: Federal, State and local income tax preparation
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