Early Withdrawal

Question: Early withdrawals of 401k? Penalties?

My niece withdrew her 401k out early. She had a total of $60,000. She only received $34,000. She said she also paid over $12,000 to the irs, but she is trying to file her taxes now and instead of the $34,000 (which she received) showing up on her turbotax, it shows that she made a total of $96,000 for the entire year. ($60,000 +36,000 that she actually made in 09) So she says it looks like she ‘underpaid’ the irs. Keep in mind her 401k ‘kept’ the other $14,000., so why is it showing up this way?

Answer: hmm, if I read correctly, isn’t $12,000 (20%)?
..and where DID the $14,000 go? Are you sure she didn’t receive all but the $12,000??(the total of $48,000)? I mean, isn’t there like some penalty for drawing out early? Maybe that’s where it went. And, has she received her forms to actually file?

I think she could benefit from going to the link William has attached.

good luck with that one

Personal Finance: 401(k) : How to Withdraw 401(k) Money With No Penalty