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I will be leaving my job in January and have no immediate

Customer Question
plans to return to work...
I will be leaving my job in January and have no immediate plans to return to work. I am 56 years old. I would like to cash out my 401k to pay off my entire debt. Will I be subject to the 10% early withdrawal penalty? Also, I understand that at the time of the disbursement, 20% will be held or sent to the IRS for income tax purposes, is the correct?
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: I am married, husband is employed. No other dependents.
Submitted: 1 year ago.Category: Tax
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Answered in 4 minutes by:
10/6/2016
Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago
ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 718
Experience: Business Consultant/Accounting Manager
Verified

Hi. Great Questions. Yes on the 10% penalty. Most 401k plans do withhold the taxes. The only way you could not withhold is to have the employer roll it over to an IRA at certain investment companies, such as Vanguard, which gives you the ability to not withhold. However, if you under-withhold, you may pay an under payment penalty on your taxes.

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Tax Professional: ABC Accounting Group, Certified Public Accountant (CPA) replied 1 year ago

If you have any questions, let me know.

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