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DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 793
Experience:  Years of Experience in Business & Personal Taxes
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I am just two months from being 59.5 yrs old. I am ready to

Customer Question

I am just two months from being 59.5 yrs old. I am ready to roll over my 401K into
an IRA or a RothIRA. I want to take 1-15% of the total and apply that to pay off debt.
I'll be working again as of next week ... in a new job, my question is this : How do I know how much tax will need to be paid on this distribution ? and do I have to pay the taxes immediately ? can I wait until I file my taxes in April 2012 ? can I splitthose taxes over two tax yrs ?
Submitted: 6 years ago.
Category: Tax
Expert:  DanielleCPA replied 6 years ago.


Hi and welcome to Just Answer! I'm happy to help with your tax questions. Feel free to interject at any time if you need clarification.


Since you will be 59.5 when you make the distribution, you won't be subject to the 10% early withdrawal penalty. The money you withdraw from your 401k will be taxable at your ordinary income tax rate. So, if you are in the 25% tax bracket, it will be taxed at 25%.


It is pretty standard to withhold 20% of taxes on 401k withdrawals, so that should cover a good portion of your taxes unless you are in a very high tax bracket.


You cannot split the taxes on the withdrawal over 2 years, but you do not need to pay the taxes immediately. As long as you pay at least 100% of last year's tax liability or 90% of this years tax liability in your withholdings, you will not be penalized for paying in April 2012.


OK thanks. Does a tax sheltered fixed 10 yr annuity make sense in this economic environment?

DanielleCPA and 2 other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Thanks: appreciate your honesty. This has been very helpful.
Expert:  DanielleCPA replied 6 years ago.
You're welcome. It was a pleasure to work with you.