Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I purchased a condo in 2011. I paid $271,000 for the condo.

Customer Question
At the same time I...
I purchased a condo in 2011. I paid $271,000 for the condo. At the same time I cashed in my 401k for $116,000 to cover the downpayment. $23,000 was withheld for taxes to cover this disbursement. Yet my taxes are showing a balance due of more than $5,000. I thought that if this disbursement money was used to purchase a first time home pirchase, we would be ok for our taxes. Please help.
Submitted: 5 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 4 minutes by:
4/2/2012
Tax Professional: R. Klein, EA, Enrolled Agent replied 5 years ago
R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3,375
Experience: Over 20 Years experience
Verified

I understand you cashed out your 401k. The FULL amount of the distribution is subject to regular income tax as though it were wages.

 

In addition, if you are not yet 59.5 at the time of the distribution, the entire amount is subject to an additional 10% penalty for early distribution.

 

If this is a first-time purchase of a personal residence, there is a special exception to the penalty rule and that is $10K of the distribution is not subject to the 10% penalty (in other words you save $1,000 in penalty tax)

 

Likely that $23K (or 20%) is not enough to cover all the tax. Assuming this distribution keeps you still in the 15% tax bracket, your tax on the distribution is at least 25% (15% + 10% penalty rate) minus the $1000 exception.

 

ONLY the $10K is exempt from the penalty. This is reported on Form 5329.

 

There is no place to enter the purchase price of the home because it is irrelevant for the tax return.

 

Ask Your Own Tax Question
Ask R. Klein, EA Your Own Question
R. Klein, EA
R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3,375
3,375 Satisfied Customers
Experience: Over 20 Years experience

R. Klein, EA is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

3,375 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I have a tax question for required minimum distributions
I have a tax question for required minimum distributions after 70.5 years of age.Let's suppose someone takes 5 times the RMD in 2016. Can any portion of that money count for 2017? In other words, can … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Geetings- RE: Equitable distribution and distributive award.
Geetings-RE: Equitable distribution and distributive award.E.D. Judgment: marital home is over-valued. . Broker uses the courts over-valued sales price. . 5 five months later broker recommends $75K sa… read more
Patrick Mullis
Patrick Mullis
Masters
17 satisfied customers
I intended to request a traditional IRA distribution in
I intended to request a traditional IRA distribution in 2017. Unfortunately I miscalculated the date and missed the deadline by 1 day. If I request it tomorrow, the financial institution that holds my… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
If I am reviewing my 2016 Income Tax Returns, which are
If I am reviewing my 2016 Income Tax Returns, which are itemized. (Married, 2 children)Add Line 40 (Itemized Deduction) + Line 42 (Exemptions ($4050 x 4 = $16,200)) which I would subtracted from Line … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,067 satisfied customers
FOR GUILLERMO: What line on the 1040 income tax return is
FOR GUILLERMO: What line on the 1040 income tax return is used to determine the sponsor's income for Form I-864? Is it line 22: TOTAL INCOME? Or, line 37, ADJUSTED GROSS INCOME?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How do I know if I qualify for exemption from the personal
How do I know if I qualify for exemption from the personal mandate? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
Is income from an LLC passed through to personal tax return
Is income from an LLC passed through to personal tax return considered earned income, enabling me to contribute to a traditional IRA?… read more
abci168
abci168
Principal
27 satisfied customers
I haven't filed a personal return since 2011 tax year. In
Hello. I haven't filed a personal return since 2011 tax year. In 2013, I moved overseas, and didn't return till 2016. Can I just file my back taxes, or must I consult with tax attorney first for any i… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
I am completing my personal income taxes. For this filing
I am completing my personal income taxes. For this filing year, I left my corporate career to manage my real estate full time. Therefore, the real estate is moving from a passive activity to an active… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Given that the current 1041 tax rate on 401(k) income is
Given that the current 1041 tax rate on 401(k) income is $3206 + 39.6% over $12,400, what will be the new tax rate and will it apply for 2017?… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I need to complete form 5329 for an RMD due but not taken on
I need to complete form 5329 for an RMD due but not taken on an inherited IRA. I have the instructions but they aren't clear to me. I have entered the RMD amount of $1780 on line 52. I have entered th… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
TAX RETURN: Health coverage exemptions I moved from Europe
TAX RETURN: Health coverage exemptions I moved from Europe to the US in mid-2015 and applied for a green card in oct based on marriage to a US citizen (which was granted to me in spring 2016). We are … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
What is the income tax rate if it is not withdrawn from the
Hi! What is the income tax rate if it is not withdrawn from the LLC? The owner has not withdrawn any balance from the business all the amount reinvested into the business. Thank you!… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
The $14,000 gift tax exemption per person - can the gifts
The $14,000 gift tax exemption per person - can the gifts only be transferred to spouses and children or can it be given to son-in-law?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,275 satisfied customers
Form 5329. Taxpayer (his financial advisor) just realized
Form 5329.Hello,Taxpayer (his financial advisor) just realized that he should have taken his first RMD in 2016 tax year. They are making the required 2016 withdraw now and later in the year they will … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
Rules on Rollovers (Return of a non-taxed IRA Distribution).
Rules on Rollovers (Return of a non-taxed IRA Distribution). Over 70-1/2 years old) … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I filed my 2016 federal taxes and attached IRS Form 5329 and
I filed my 2016 federal taxes and attached IRS Form 5329 and asked for a waiver on the tax on an RMD. We received the RMD (in 2017) late through no fault of our own but because of the financial compan… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x