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chicag0guy25 | I cashed out on a small 401K from a diffrent employer and all I got was a check 1700.. Out of 5400 in.. Why? |
I worked in a small company a few years ago and I had a 401K plan that I forgot about. I decided to cash out since I am well with my company that I am at now. I had 5400 in my 401K and I received a check with "FIT of 20% deducted" in the memo. What does this mean? The check was for 1700.. is this all that I am getting?? I thought I would get more like 3500..
Additional Details
I don't think they hit the retirement.. and I had no loans either.. It was at 6130 before and the statement shows after the loss it was at 5400. I did have profit sharing at 2600 included in that 5400 from the company. It still doesn't add up to me. Why only 1700,?? Should I even bother cashing the check?? |
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Judy1
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Sounds like maybe it went down a lot more between the time it was worth $5400 and the time you cashed it in. And even as volatile as the stock market has been lately, that would be a huge loss.
And no, you don't get a check for the taxes, that goes to the IRS. Call and ask why the amount you got was so low. If the balance was $5400 and they took out 20% for tax, your check should have been $4320.
Is it possible that your profit sharing amount isn't included? |
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Gem
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When was the account valued at $5400? My 401ks have lost 20% of value in the past two months, down another 20-25% from this time last year (so down almost 50%).
The FIT is Federal withholding that is sent to the IRS. When you file your taxes you will have to add the amount of the total 401 withdrawal (including the FIT they sent to the IRS) to your income. You will also be hit with a 10% early withdrawal penalty.
401ks are funded with untaxed money. When you withdraw money, either now or at retirement age, you have to pay income tax on the amount you take out. If you make a withdrawal before retirement age you get hit with both taxes and penalty.
Sorry.
The way to avoid this would have been to directly transfer the 401 to another company without your ever touching the check.
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Helen, EA in PA
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The FIT is federal withholding. Has the economy hit your retirement or did you have loans against it?
Helen, EA in PA
Additional answer - you may not have been fully vested in the plan so you would not get the entire $5400. That is the only other explanation I can think of. This should be your only check. |
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shiprepairwoman
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It should have only had 20% deducted, you will pay the rest of the taxes and penalties when you file your tax return. You may not have had 5400 in it when they cashed it out the markets are down right now. So if it was worth about 2,200 and they withheld 20% that would be about right. Make sure you save money to pay the taxes since you probably are in a high marginal rate maybe 15 or 25% and you have the 10% penalty if you are under 59.5 so your total tax bill will be more like 35% so keep back another 400 for the rest of the taxes and penalties. |
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ninasgramma
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You can call your former employer and ask for a copy of the plan document. It may be that you were not vested in the entire amount. If you subtract the $2,600, and then figure a market loss, the proceeds make sense.
Of course you should cash the check. The check is the proceeds of your 401k. About $425 has been withheld for federal income tax (FIT). You will receive a 1099R for this distribution. Use it when you file your tax return. |
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digdowndeepnseattle
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Without seeing the statements it's hard to tell exactly what happened. But here's a guess>>>
$5400 of which $2600 is profit sharing that you are 0% vested in so taxable distribution amount is $2800. You live in a state with an income tax of 10% which when combined with the mandatory 20% withholding gets you down to 1,960. Close but not quite...but a market decline after your last statement would account for the last $200+ drop. |
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travelguruette
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You will still have state income taxes due (if not already taken out) and a 10% penalty paid at tax time. |
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stephenweinstein
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FIT is federal income tax. That means that 20% was withheld for federal income tax.
Unless you rollover the money into another IRA, 401K, 456, 403B, etc., the entire amount withdrawn from the 401K, including the amount withheld for taxes, is taxable, whether or not you cash the check. There is no advantage to doing nothing with the check. |
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Ed Atun
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They took out 29% for Federal Income Tax. You better go back and make some visits to find out what happened to your money. Tell the other employees to watch out when they leave.. |
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JB
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I cashed out a $1,850 profit sharing plan from an old employer, do I have to pay taxes on it when I never received a 1099-R? I believe that is the form, correct me if I am wrong. |
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