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401K distributions are regulated by federal government regulations. Unless it is Roth 401K, the entire distribution will be added to your income and taxed according to your tax bracket. In addition, there's 10% early distribution penalty if you are younger than 59 1/2. The distribution will be taxable in IN as ordinary income as well, except there's no penalty on state return.
If you don't need the money and you cannot leave it with the employer, you can open an IRA and make a direct rollover. There's no tax or penalty if you roll it over into another retirement account.
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