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, I cashed in retirement of 16K and withheld 20%. I'm…

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I cashed in retirement...

I cashed in retirement of 16K and withheld 20%. I'm under 59 so I'm gonna get hit with the extra 10% penalty. Biggest question is will this bump me into next tax bracket? for instance, If Im at 80K income now, plus the withdrawal of 16K, will that mean that i will get hit for higher taxes on the 80k since it will bump me into the 28% tax bracket? I haven't taken out extra taxes against my regular income, so I'm afraid this will crush me financially.

Submitted: 2 years ago.Category: Tax
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Answered in 22 minutes by:
2/20/2016
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Q: If Im at 80K income now, plus the withdrawal of 16K, will that mean that i will get hit for higher taxes on the 80k since it will bump me into the 28% tax bracket?

A: As the distributed amount is added to ordinary income, the 16k will put you in the 28% tax bracket, and as you stated, you are going to get hit with the early withdrawal penalty as well, unless you meet an exception. There are exceptions that can exempt taxpayers to the 10% early withdrawal penalty. What type of retirement vehicle did you make the withdrawal from?

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Customer reply replied 2 years ago
I had it sitting in a money market it was 401k, not deferred tax account. You mean to say I will now get hit for the following:
essentially 96K at 28%
plus 10% penalty on the 16k?
Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago

Sorry, but yes, regarding the 28% tax bracket if you file single, and if you don't meet an exception, the additional 10% penalty as well.

If you meet any of the exceptions shown on the page at the following link (Yes--under the 401k), you will not have to pay the 10% early withdrawal penalty. If you do meet an exception, you will need to complete Form 5329 to show that you qualify for an exception.

Let me know if I can be of further assistance to you regarding this matter. If all is clear, please be so kind as to positively rate my response so that I may receive credit for assisting you.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 2 years ago

Let me know if you require further assistance with this matter. If not, please be so kind and positively rate my response 3 or more stars so that I can receive credit for assisting you.

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