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Category: Tax
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Experience:  over 40 years experience in tax matters
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Hello: I have a 401K tax question. My earnings information

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I have a 401K tax question. My earnings information for 2011 is as follows:
$85,345.00 earnings for 2011
$19,725.85 "defaulted" 401K loan to be treated as income.

I am considering withdrawing the remaining $22,621.35 in 2011 vs. 2012. Is there advantages to withdrawing in 2011 vs. 2012 and what is my estimated tax liability under both scenarios?

I am head of household with 5 dependents and currently live in the State of New Hampshire

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

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%.

Customer: replied 5 years ago.



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?

If you take no additional money from the 401(k) you will still get a refund, but about $5,000 less than normal. If you take the additional money you should be about a break even.
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Customer: replied 5 years ago.
Thank you for the confirmation and your time.
You are quite welcome. Please feel free to return any time we can assist you.