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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15745
Experience:  15years with H & R Block. Divisional leader, Instructor
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I live in Louisiana and I have a 401k and a profit sharing

Customer Question

I live in Louisiana and I have a 401k and a profit sharing account with a previous employer. I'm opting to take the lump sum of both of these accounts, and I'd like to get all of the possible taxes out of the way now, rather than having them hit me at the end of the year. With taking a lump sum, I have two things to figure out. First, is a the taxable portion, of which 20% of federal taxes come out. So if I choose 100% paid directly to me, I shouldn't have to worry about federal taxes, as they will already be taken out, or so I hope. Next, it gives me an 'after tax portion'. It gives me another percentage to fill out. How much should I use so as to not get it at the end of the year. Next is state tax. Louisiana is a voluntary state, but as I said, I want to deal with it now, rather than later. What amount should I use for state taxes?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.
Hello20% may be enough to cover your tax that the added 401k will make. If you are not more than 59 1/2 you will be assessed an additional 10% penalty for early withdrawal.LA rate would be 4%.
Customer: replied 1 year ago.
So if I fill out that I want 100% of the taxable portion payed directly to me, and 100% of the of the after tax portion layed directly to me as well. The 20% federal withholdings, which should be taken out automatically will cover me for the year?
Expert:  Robin D. replied 1 year ago.
The 20% may be enough. It all depends on your income for the year and if the amount you are receiving does not place you into a really large tax bracket.I can give you a link to a tax calculator (it has 2015 info but should work fine for you) to estimate your tax liability.You will need to know what you will earn and all income for 2016 as well as withholding amounts.
Customer: replied 1 year ago.
Ok, before I start reading through that, if I were to fill out 90% of the taxable portion to be payed directly to me, would the remaining 10% be used in conjunction with the 20% that would already be taken out?
Expert:  Robin D. replied 1 year ago.
You would list that you wish 100% to be paid to you with 30% withholding if you want them to withhold for income tax and the penalty.Please remember to rate my service once you have all the information you need. If you have any other questions, please ask me – I’ll be happy to respond. Thank you!
Customer: replied 1 year ago.
With the papers I have, I'm not seeing an option for how much to take out for federal taxes.
Expert:  Robin D. replied 1 year ago.
Then they will just take the 20% that is traditionally withheld.
Customer: replied 1 year ago.
If I over estimate, will I get a refund at the end of the year?
Expert:  Robin D. replied 1 year ago.
Yes, the withholding works the same as withholding from your wages. You report the income the taxes withheld when you file.
Customer: replied 1 year ago.
The the 10% penalty for withdrawing before retirement age, will that be taken out along with the usual 20%.
Expert:  Robin D. replied 1 year ago.
Only if the fund will allow that. I had an IRA at one bank a few years back and the bank would not withhold anything at all. Then another 401k allowed for additional tax to be withheld above the 20%. It depends on the plan and the administration.