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The estimated tax on the 401(k) defaulted loan is 15% or $2960 plus, if you are under 59.5 years old, another 10% or $1973 for the early distribution penalty. The remainder of your tax should be covered by withholdings.
I would avoid taking the additional amount in the plan until 2012 (early January is the same as the end of the year 2012). It may push your into a higher tax obligation since it will also serve to limit some of your itemized deductions thereby increasing tax more than just the regular rates of 15% and perhaps 10%.
Thanks for your quick reponse and advice. I typically get back between $8K & $10K between state & federal with all of my deductions and earnings withheld.
Would you estimate this amount to "break even" for the 2010 year?