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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1006
Experience:  Certified Public Accountant
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How much would i owe the irs in income taxif i let a 401k

Customer Question

How much would i owe the irs in income taxif i let a 401k loan of $6300.00 default. I lost my job and i am in a serious bind. I have to pay off a loan from a credit union. So its a double whammy.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: No
Submitted: 4 months ago.
Category: Tax
Expert:  Mark Taylor replied 4 months ago.

Hi, my name is Mark. I will be happy to help you.

Expert:  Mark Taylor replied 4 months ago.

I am sorry to hear about your situation. I assume that you are under 59 1/2?

Expert:  Mark Taylor replied 4 months ago.

Sometimes the credit card companies deny a second purchase thinking it may be a potential fraud.

Expert:  Mark Taylor replied 4 months ago.

I believe that I should be able to handle your questions through chat.

Expert:  Mark Taylor replied 4 months ago.

If you are under 59 1/2 there is a 10% penalty on the $6,300 so $630.

Expert:  Mark Taylor replied 4 months ago.

You would also pay income tax on the $6,300. If you can let me know where you think your taxable income will be for the year I can let you know what bracket that you fall in.

Expert:  Mark Taylor replied 4 months ago.

If you are in the 25% bracket and a 5% state bracket you are looking at another 30% of $1,890. For a combined total of $2,520.

Expert:  Mark Taylor replied 4 months ago.

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Customer: replied 4 months ago.
i will get taxed 10% early w/d. I know that. My concern is in addition to the 10% penatly how much will i owethe irs. The total is 7300.00 in 401k. The loan is 6300.00. I am w/d all of the 401k which is 7300.00..by doing so the 6300.00 will default..so its a total of abot 13000.00 that will be taxed.
Expert:  Mark Taylor replied 4 months ago.

Do you know approximately how much taxable income you will have for the year? What state are you in?

Expert:  Mark Taylor replied 4 months ago.

For the $7,300 I believe that they will automatically w/h 20%.

Expert:  Mark Taylor replied 4 months ago.

How much do you think your total income will be for the year?

Customer: replied 4 months ago.
Total income 29100.00
Expert:  Mark Taylor replied 4 months ago.

Is this including the $13,000?

Expert:  Mark Taylor replied 4 months ago.

Are you single? Any dependents?

Expert:  Mark Taylor replied 4 months ago.

What state are you in?

Customer: replied 4 months ago.
including the 13000.00...married filing separately one dependant my son in whom i claim
Expert:  Mark Taylor replied 4 months ago.

So file as head of household?

Expert:  Mark Taylor replied 4 months ago.

What state are you in?

Customer: replied 4 months ago.
Tn
Expert:  Mark Taylor replied 4 months ago.

ok give me a few moments

Customer: replied 4 months ago.
Ok
Expert:  Mark Taylor replied 4 months ago.

Assuming that your child qualified for the child tax credit the taxes are going to be minimal. You have the $1,300 penalty but with an income of $29,100 - I am showing income tax of $800 for federal. So a combined amount of $2100. The state amount is around $900. So $3000 combined.

Customer: replied 4 months ago.
What if total is about 35000.00
Expert:  Mark Taylor replied 4 months ago.

Your total income?

Expert:  Mark Taylor replied 4 months ago.

Assuming that is your total income you are looking at $2950 for federal and $1850 for state. These are estimates but they should be in the ballpark.

Customer: replied 4 months ago.
They don't have state tax here
Customer: replied 4 months ago.
I pretty much filed exempt all year. I was sick alot missing work so to make ends meet i filed exempt to make up for the difference for not working. Got a 3400.00 bonus at work filed exempt on that too
Expert:  Mark Taylor replied 4 months ago.

That is good about the state tax. So at $35,000 you are looking at about $2,950.

Expert:  Mark Taylor replied 4 months ago.

They should w/h $1400 on the $7000 distribution.

Customer: replied 4 months ago.
Are you including the 3400.00 bonus i filed exempt on?
Expert:  Mark Taylor replied 4 months ago.

Sorry, I had to step away from the computer. Is the $3,400 in addition to the $35,000. If that is the case you are in the 15% bracket. The tax on the $3,400 would be $510.

Customer: replied 4 months ago.
The 3400.00 was a bonus which i filed exempt so i get a 1099r form but it was part of my gross of 35000.00
Expert:  Mark Taylor replied 4 months ago.

Ok the bonus should be part of your W-2. Based on what you are saying the $2950 amount should be correct.

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