Early Withdrawal

Archive for the ‘IRA Withdrawals’ Category

Question: Taxes on a 401k withdrawal question?

I was recently terminated and on our company website it is giving me the option to withdrawal my 401k.. Its not a huge amount so I dont want to go through the trouble of rolling into IRA.. My question is this: I know that it is taxed 20% + 10% fee etc, but I am wondering if that amount is taken out and they send you the rest, or do they send you the lump sum and you are responsible for paying the taxes on it come year-end..?
Ok, very good info, but my question is a bit more specific: Lets just ASSUME I have $1000 available to withdrawal, and lets ASSUME it gets taxed 50%.. The question is will I get a check for $500, or will I get a check for $1000, but be subject to the $500 tax at the end of the year..?

Answer: You will be responsible for the 10% penalty.

As for the regular tax, the difference between the withholding and your actual tax will be either your responsibility (if actual is more) or overpayment (if withholding is more).

Also note you will be assessed tax on state and local level, if applicable. Generally withholding is not automatically done on the state and local level.

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Question: Is it legal and all to have both a Standard Accounts with my discount online broker and a Roth IRA?

Notice I’m not asking if it is ok to have a IRA and a Roth IRA. I’m asking is it legal and all to have a Standard Account and a IRA whether regular IRA or Roth.

Answer: Yes.

Retirement Plans & Investments : Taxation of Nondeductible IRA Contributions

Question: IRA Accounts: Can you withdraw from a traditional IRA for college?

A link is what I’m looking for here, but any comments are more than welcome. I know that withdrawals can be made for Roth IRAs up to what has been deposited, for a first house, and for colleges. Do the same or any of these conditions apply to the traditional IRAs? My dad doesn’t understand the system, and is having problems paying for my sister’s college. Thanks!

Answer: Go to www.irs.gov and search for Publication 590, Individual Retirement Arrangements, to confirm the information I’m sharing with you. The IRS server is really overloaded right now, so you might have to be persistent in trying to access the information.

You can withdraw from a traditional IRA to pay for higher education expenses without paying the normal 10% tax penalty; however, the amount withdrawn may be subject to regular income tax.

If your father was able to take a tax deduction at the times he made his contributions, then the amounts withdrawn have not been taxed previously and would be subject to tax in the year he takes the distribution. If your father made non-deductible contributions to his traditional IRA, then only the portion of the withdrawal that represented the earnings would be subject to income tax.

Bring It On: IRAs – CBN.com