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http://money.cnn.com/200
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OR what is the MOST you can make and NOT have to file? (same difference)
also if you dont file this year...would it be possible to file for both your 2005 and 2006 taxes next year?
<... |
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I am 19 years old. My dad claims me as a dependent.
In 2006 I earned:
$3,708.17 in wages.
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$26.04 in dividend payments.
$608.06 in ... |
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apwomack | Is there a way to not pay a penalty on my taxes for withdrawing a retirement fund? |
I closed a retirement account to help pay off bills so I could reduce my debt to income ratio and buy a house. I know in some ways you can write this off on your taxes maybe if it was used for the down payment or something, but didnt know if there was another way thanks.. |
 |
 
Michael R
 |
No, you will always have to pay Income tax on money taken out of an 401k. Since you were never subject to paid any income tax on the money.
Tell me you didn't take a loan from your 401k. They are the worst things to do. Even if you pay off your high interest debt. Since you will pay income taxes a second time when you retire. That right there is legal double taxation in a sense. What you should do is lower or stop all funding to your 401k and instead take the money and pay off your debt. Then return to paying into your 401k.
You can differ the 10% penelty like the first poster stated for special reasons. But still it is not worth it in the long run. |
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ninasgramma
|
If your bills were medical bills that exceeded 7.5% of your AGI then that amount can be excluded from the penalty.
If your account was an IRA then the first $10,000 used to purchase a first home is excluded from the penalty.
IRA distributions used for qualified higher education expenses are also exempt from the penalty.
There are other exceptions which I omit here. |
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CB CPA in TN
 |
Most of the answers here are correct. Michael R is NOT correct, though, when he says this is legal double taxation.
401K money is money that is withdrawn from your paycheck BEFORE it is ever taxed. That is why when you go to draw it out, you pay tax on whatever amount has previously escaped taxation.
IF you make the withdraw on Thur and turn 59 1/2 on the following day, the distribution gets hit with an additional 10% penalty tax. This is over and above whatever your regular tax bracket is. If you're in the 25% bracket, then the total tax paid to withdraw your money from a 401K account is 35% IF you've withdrawn it before you turn 59 1/2.
The IRS requires a 20% withholding tax which goes toward paying the tax on the 401K distribution. This is no different than the withholding from your paycheck - it simply goes into a holding account under your name with the IRS until you file your tax return and claim it. If you're in the 15% bracket and are over 59 1/2 so that there is no penalty tax, then the extra 5% will go toward paying any other taxes you owe and the rest will be refunded. This is NOT double taxation - it's just a means for the govt to collect an ESTIMATE of what might be due.
401K withdrawals are more restricted than IRA withdrawals. There are fewer items they may be used for to escape being hit with that under 59 1/2 penalty. Best to consult a professional - CPA or EA! Don't leave this one to the "fast" tax chains or a boxed software. You'll likely be saving more money in the long run.
Good Luck!
http://www.TaxEfilers.com |
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Doctor Deth
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you can't "write it off" - it's all income, so you have to pay income tax on the withdrawal, plus 10% penalty if you are under 59-1/2 |
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Becky J
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You will still pay the tax on the amount that you took, you can avoid the 10% penalty on this money for various things. For instance first time home buyer, kids education, high medical bills. You can find out more on the IRS website. |
|
wartz
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The money in your retirement fund is intended for your support in your old age. It is not a piggy bank to be used now. To discourage people not to take the second option, the government has imposed a penalty for making it more likely that you will become a public burden in the future. It was your choice. |
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chatsplas
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Were you over 59 1/2?
Was it 401k or IRA? Different rules on exceptions to additional tax being assessed.
By taking money out you generally get hit with 10% penalty and 10% (or higher) tax. With an exception you can eliminate one but not the other. |
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Benny L
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if the money is put in an Ira, or mutual fund, or a trust fund , all for future use, no taxes are to be paid. however a penalty may be applied if this is related to an early withdrawal. If you take the money out and you are going to use it for something, legally you will have to pay tax on what you remove. |
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