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Have a question about tax deductions my 401K withdrawals since I may need to a distribution of a large amount?

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I plan on taking out at least 40,000 to pay off debts.

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I have been taking a monthly income of 1,958 expenses that would I think would go away after paying of debt

Submitted: 10 months ago.Category: Tax
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10/1/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 10 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,795
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

I am not sure what your questions is, or what you mean by "I have been taking a monthly income of 1,958 expenses that would I think would go away after paying of debt", but if you want to know what the withdrawal rules are and what the tax implications are. I will provide you with that information. SEE BELOW:

---------------------------

Summarized Withdrawal Rules:

1) Distributions are taxed at the ordinary income tax rate. Example, if you are in the 25% tax bracket, that is the rate the distribution amount will be taxed at.

2) If you are not the age 59-1/2 years old, you will get hit with a 10% early withdrawal penalty. If you are older than 59-1/2, there will be no early withdrawal penalty.

3) Depending on your state or residence, the 401(k) plan provider will be required to withhold 20% for federal income taxes and 2% to 8% for state income taxes. What state are you located in?

--------------------------

For a list of exceptions to the 10% penalty, you can refer to the following link;

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

Let me know if you require further assistance with this matter. If not, I ask that you please take the time to scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. A 5 star rating is greatly appreciated. Thank you in advance.

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