Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

After 27 straight years of employment I am now without a job…

Customer Question
After 27 straight years of...
After 27 straight years of employment I am now without a job going on 6 months. I need to cash in my 401k and IRA in order to pay bills.
I'm 50 years old and I was in the 30% tax bracket. My wife has Lupus and it's getting more difficult to work as a nurse as she's required to be on her feet most of the time.
My question is: Is there any relief from the IRS penalty that I can site when withdrawing my 401k?
Submitted: 3 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 8 minutes by:
6/9/2015
Tax Professional: Lev, Tax Advisor replied 3 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,311
Experience: Taxes, Immigration, Labor Relations
Verified
Hi and welcome to our site!Sorry for your situation...There are several exclusions from the penalty.Please be aware that distribution still will be included into taxable income.Please be aware that exclusions might be different for IRA distributions and 401k distributions.The following six exceptions apply to distributions from any qualified retirement plan: Distributions made to your beneficiary or estate on or after your death. Distributions made because you are totally and permanently disabled. Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply. Distributions to the extent you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is age 65 or over) whether or not you itemize your deductions for the year. The 7.5% limitation is a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. Distributions made due to an IRS levy of the plan under section 6331. Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001.The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50. Distributions made to an alternate payee under a qualified domestic relations order, and Distributions of dividends from employee stock ownership plans.
Ask Your Own Tax Question
Customer reply replied 3 years ago
Is the IRS penalty less for an IRA withdraw versus a 401k withdraw?
Tax Professional: Lev, Tax Advisor replied 3 years ago
To discourage the use of retirement funds for purposes other than retirement, the law imposes a 10% additional tax on early distributions.
That is so-called "early distribution penalty."
That 10% additional tax applies to both 401k and IRA distributions unless an exception applies.
For your situation - it is possible to start distributions as a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (your spouse) - that will allow to avoid that early distribution penalty.
You may view that distribution as starting your retirement before 59 1/2.
Payments are substantially equal periodic payments if they are made in accordance with one of the following methods.
-- Required minimum distribution method. Under this method, the resulting annual payment is redetermined for each year.
-- Fixed amortization method. Under this method, the resulting annual payment is determined once for the first distribution year and remains the same amount for each succeeding year.
-- Fixed annuitization method. Under this method, the resulting annual payment is determined once for the first distribution year and remains the same amount for each succeeding year.
For information on these methods, see Revenue Ruling 2002-62, which is on page 710 of Internal Revenue Bulletin 2002-42 at
www.irs.gov/pub/irs-irbs/irb02-42.pdf
.
Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,311
33,311 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev 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

1,338 satisfied customers

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

Richard

Richard

Tax Attorney

4,512 satisfied customers

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

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

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

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 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.

< Previous | Next >

Related Tax Questions
I am 55, if I have a 401k with my employer and a separate
I am 55, if I have a 401k with my employer and a separate IRA, with 25,000 in it, can I take it out under the 72t rule without penalty since I am without a job now? My 401k is with my past employer I … read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,311 satisfied customers
Just started a new job in December. On 12/14/15 I did a
just started a new job in December. On 12/14/15 I did a roll-over of my 401k from my old employer to my new employer. While employed at my old employer I had a loan taken out with a balance of $20k. I… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
, I live in California and I am 63 and my wife is 52. I'm
Hello, I live in California and I am 63 and my wife is 52. I'm retired and have rolled my pension and 401k into an IRA. My wife has a 401k, but won't be able to roll it over as well as her pension for… read more
fastfile
fastfile
Tax Advisor
Master's Degree
550 satisfied customers
The company that I work for was sold last year and the 401K
The company that I work for was sold last year and the 401K that was with that company was stopped (not my decision) and a new 401K started up with the new company. I need to take the lump sum from th… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
Just as my bleak past was beginning to turn around, my wife
Just as my bleak past was beginning to turn around, my wife said to me that she is no longer my wife and that she would give me a bit of time to get onto my feet. I have been receiving neurotherapy tr… read more
abci168
abci168
Principal
27 satisfied customers
I was laid off from my employer in June 2011 with whom I had
I was laid off from my employer in June 2011 with whom I had a 401K. I am 58 years old. I started a new job in December 2011. Can I withdraw money from my June 2011 employer's 401K without the 10% ear… read more
Jax Tax
Jax Tax
Senior Tax Attorney
Master's Degree
1,363 satisfied customers
Hello, I am a 58 year old male who is getting a legal separation
Hello, I am a 58 year old male who is getting a legal separation from my wife of 10 years. She is 59. As part of our legal separation agreement, I will liquadate a large part of my IRAs ($250K) and tr… read more
Jax Tax
Jax Tax
Senior Tax Attorney
Master's Degree
1,363 satisfied customers
Hi, I make regular automatic Roth IRA contribution. Last
Hi, I make regular automatic Roth IRA contribution. Last year towards the end of the year, I sold some stocks that bumped up my income bracket substantially, making me ineligible for roth contribution… read more
Bill
Bill
Master's Degree
2,278 satisfied customers
I need to find out how to get monies out of an IRA. My sister has an IRA through a divorce
I need to find out how to get monies out of an IRA. My sister has an IRA through a divorce settlement that she desperately needs to get money out of. Is there still a 30% penalty for withdrawal prior … read more
Jax Tax
Jax Tax
Senior Tax Attorney
Master's Degree
1,363 satisfied customers
Tax question. My wife took out a hardship withdrawal from her
Tax question. My wife took out a hardship withdrawal from her 401K for our down on a 1st time home. my wife was 6 months short of 59 1/2. They understandably took the 10% for tax. But then at tax time… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,311 satisfied customers
Lets say a couple is getting divorced and the settlement awards
Let's say a couple is getting divorced and the settlement awards her the entire 401k via a qualified domestic relations order (QDRO). Does a qdro really avoid all the penalties and the tax that would … read more
Bill
Bill
Master's Degree
2,278 satisfied customers
my wife & I just bought a home as first time buyers in 02/2011.
my wife & I just bought a home as first time buyers in 02/2011. we used $22,000 from her 401k a former employer a total withdrawal & $16,000 from my 401k also a former employer also a total withdrawal… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,311 satisfied customers
I plan to retire soon at the age 0f 55. I plan to take lump
I plan to retire soon at the age of 55. I plan to take lump distributions from my 401k. Is it true that ever since I am leaving my employer, the 10% penalty will not apply? If this question is true, c… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I withdrew my pension early and used it for a down payment
I withdrew my pension early and used it for a down payment on a home. I was required to pay off my bills and put 30% down for my mortgage. Can I claim any of my pension for write off? I had to pay a s… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I have recently lost my job and have a 401k plan that Im 100%
I have recently lost my job and have a 401k plan that I'm 100% invested, I have a large amount of bills and need to use the funds in my plan, I've been advised that I have to pay a 20% penalty because… read more
Bill
Bill
Master's Degree
2,278 satisfied customers
I have had a rough year, things are better now. I was laid
I have had a rough year, things are better now. I was laid off from my job as DM for a retail chain. I ended being off work for 4 months. I made over $90000 with bonus last year so with 4 months off I… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I am just under 40 years old. I have $50,000 in my employer
I am just under 40 years old. I have $50,000 in my employer sponsored 401k account. I may be leaving this employer later this year. I am considering cashing-in the balance and paying off my very heavy… read more
Bill
Bill
Master's Degree
2,278 satisfied customers
My 401k is split with my wife for a divorce with a QDRO.
My 401k is split with my wife for a divorce with a QDRO. Can she take the cash without penalty or does she have to roll it over into an IRA etc.… read more
jgordosea
jgordosea
Enrolled Agent
Bachelor's Degree
2,885 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