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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12050
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My name is ***** ***** and I am considering taking an early

Customer Question

My name is ***** ***** and I am considering taking an early withdraw from my 401k to settle some debt from a difficult financial period. I am trying to educate myself on how this will affect me come tax time.
JA: Thanks. Can you give me any more details about your issue?
Customer: I am considering taking 13000 from my simple it's to pay off credit card debt. I have tried all other avenues of refinance and debt consolidation without success. I am just wondering how I can help myself from owing on this money at tax time. Should I take an extra 20% above the 10% penalty Simple ira *
JA: OK got it. Last thing — Tax Professionals generally expect a deposit of about $32 to help with your type of question (you only pay if satisfied). Now I'm going to take you to a page to place a secure deposit with JustAnswer. Don't worry, this chat is saved. After that, we will finish helping you.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.
Hi,...The amount you take will be added to your other taxable income for the year....Then, as you mention, if you're under age 59 and 1/2, there will be the early withdrawal tax of an additional 10%...So if your other income puts you in, say, the 25% bracket, then the distribution will be taxed at 25% plus another 10% for a total of 35% (plus state tax as well)...if you'd like to give me what you think your income will be for the tax year (and how you file - married filing jointly, single etc.) I can run the numbers FOR you...But yes, once you calculate the number (lets say my example would apply) then withholding 35% (plus enough to cover the state tax) from the distribution would offset, dollar for dollar, whatever is owed next April at tax time
Expert:  Lane replied 1 year ago.
I hope this has helped....Please let me know if you have any questions at all....If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the faces or stars on your screen, and then clicking “submit That’s the only way JustAnswer will credit us for the work here....Thank you!Lane……I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986