Have a Tax Question? Ask a Tax Expert
Hi. My name is ***** ***** I will be happy to help you.
First, if you don't want the 24K treated as distribution subject to income tax plus 10% penalty, you will have to pay it back. Loans from 401K strictly regulated and there's no way around it. Your severance pays are usually subject to 25% withholding rate so federal tax liability will be withheld from the paycheck. If you made contributions to your 401K, the amount will reduce your taxable income.
I need to get a better picture of your tax situation to help you. What's your filing status? Did you have any medical insurance through your employer or other pre tax deductions beside 401K?
If you are over 55, Charles Schwab is correct, there will be no penalty on the distribution (separation of service exemption apply here), but it will still be subject to income tax.
What do you mean with Federal was not withheld? Your severance pay should had been distributed through payroll. What's your filing status?
Did you make any contributions to HSA this year? HSA expenses will not make any difference. Also, 7K that went to 401K, was it a contribution or repayment of the loan?
That's right. I cannot help you if you don't give me information I need to help you.