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When I left my previous job I withdrew my money from my
401k plan. When the money was withdrawn it was automatically taxed 20%, so I know that I still owe the 10% early withdrawal fee. My question is, when I file my taxes I will have to claim this money as income but will I have to pay taxes on it again? Thanks for any help.
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Howard24: "When I left my previous job I withdrew my money from my 401k plan. When the money was withdrawn it was automatically taxed 20%, so I know that I still owe the 10% early withdrawal fee. My question is, when I file my taxes I will have to claim this money as income but will I have to pay taxes on it again? Thanks for any help."

Assuming that you kept all the witdrawn funds (did not roll them over into an IRA) and also assuming that more than 60 days have elapsed since you withdrew the funds, then yes, all the funds are taxable income, and you will owe the 10% penalty for early withdrawal.

The 20% was withheld, like other witholding from your paycheck, and will need to be reconciled when yuo file your tax return. If you are in a federal bracket greater than 20%, then yes, you will owe additional federal tax on the withdrawn funds. In addition, you may owe state income tax as well if you reside in a state that has an income tax.

Last, depending onthe size of your withdrawal, your other income, the amount of witholding you had taken this year, and your taxes last year, you may also owe a penalty for not making quarterly estimated payments.

My recollection of the safe harbors are 100% of last year's total tax withheld (or 105% for certain high income earners [AGI > 150]), 90% (or maybe 95%) of this year's total tax withheld, or you owe less than $1000 at the time you file your return. You should double check my memory with your tax preparer, or hope that one of the many tax gurus on the board either confirms my memory or corrects it.

Sorry to be the bearer of potential bad news.

Regards, JAFO
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<<When I left my previous job I withdrew my money from my
401k plan. When the money was withdrawn it was automatically taxed 20%, so I know that I still owe the 10% early withdrawal fee. My question is, when I file my taxes I will have to claim this money as income but will I have to pay taxes on it again? Thanks for any help.>>

As JAFO pointed out, the answer is a resounding yes. And you may find out that this was a painful decision.

Assuming that you didn't "roll over" any of the funds, and are under age 55, it'll work like this...

Say your balance in the account was $10,000. They took out the 20% withholding ($2,000) and gave you a check for $8,000.

When it comes time to prepare your 1999 taxes, you'll owe taxes on the entire $10,000. You'll also owe penalties on this SAME amount. So if you assume that you're in the 28% tax bracket, you'll owe $2,800 in taxes on the distribution, and another $1,000 in penalties...for a grand total of $3,800. And it's possible that you'll also owe STATE taxes on the same $10k.

The $2,000 that was "withheld" was just that...another form of withholding. But as you can see, the $2,000 is only about HALF of what you'll need to pay the taxes of $3,800 on these funds. So April 15, 2000 might not be the happiest day of your life.

Also sorry for the bad news..
TMF Taxes
Roy
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