Anyone know about 401k's and taxes?

[fuzzykitten99]

Don't worry,, I won't hold you responsible for any info or advice you give..

I had money left in my 401k after I left my last job, even after I took out $500 to help with our closing costs for the house.

I just got a check in the mail for over $900, which is my 401k balance less federal taxes.

the thing is, I am wary about cashing it. As much as this money would be a Godsend now that my hubby is back to only 40 hours/week, i am hoping i don't have to pay this back, or owe this.

I am sure I will have to claim this on taxes next year, but taxes have already been taken out of the balance, thus the check is less than what the balance actually was.

Should I cash the check? Is there anything I have to worry about or watch for, or be aware of?

 

[Trinity]

Don't worry,, I won't hold you responsible for any info or advice you give..

I had money left in my 401k after I left my last job, even after I took out $500 to help with our closing costs for the house.

I just got a check in the mail for over $900, which is my 401k balance less federal taxes.

the thing is, I am wary about cashing it. As much as this money would be a Godsend now that my hubby is back to only 40 hours/week, i am hoping i don't have to pay this back, or owe this.

I am sure I will have to claim this on taxes next year, but taxes have already been taken out of the balance, thus the check is less than what the balance actually was.

Should I cash the check? Is there anything I have to worry about or watch for, or be aware of?

That's so weird that you ask this since I am dealing with this situation right now.

We just withdrew all of the money from my husband's 401k plan from his former employer, we had the option of rolling it over into another plan however we need to purchase several expensive items so we decided to just withdraw it.

This is what I was told by the financial advisor of that plan, they will withhold 10% in federal taxes 10% in penalties. No state tax was withheld.

When I do my taxes for 2004 I will need to claim this money as income on my taxes.

So as long as they have withheld that taxes on you I would say by all means go cash it. It's your money, you paid into the plan.

 

[Mr. P]

You may not like this, page 5 seems to fit your situation.
http://jobsearchtech.about.com/od/careerplanning/l/aa031599.htm

PS..Don't forget about possible state tax.

 

[Shattered]

IMO, you're better off finding another way to pay for the more expensive things you want, and rolling that money back over... Out of $16,000, we actually got about $6000 cash, and still had to pay taxes on that amount....(state tax, as well - tho your state may be different)

 

[Mr. P]

IMO, you're better off finding another way to pay for the more expensive things you want, and rolling that money back over... Out of $16,000, we actually got about $6000 cash, and still had to pay taxes on that amount....(state tax, as well - tho your state may be different)

Sounds like you or he were not 100% vested.

 

[fuzzykitten99]

they already took taxes out. the balance was $1241.79, and they took $248 out right on the statement.

i didn't ask for the check or to withdraw the money. i thought it would stay there until i decided to do something with it.

i called the hr center of my last job, and they said that if the balance is less than $5,000, they just automatically cut a check to you.

the amount of money that the check is for is not enough to worry about for taxes, because we have so many deductions now, like our son, and the house.

this is gonna pay our trip to Vegas (at least the hotel and car rental). we have a large refund for income taxes coming that would be more useful towards any debt we have.

 

[Mr. P]

Well, it looks like they took out the 20% tax required by law..But not the 10% penalty, nor state tax.
Check the link...It has all the info.

 

[Merlin1047]

I would check with the IRS or a tax advisor who won't charge you for answering a question (H&R Block). But unless I'm mistaken, I believe that it's too late to worry about it. Once you have a check made out to you that means you have to pay taxes on the face amount. The only way to avoid paying taxes and penalties is to roll over the 401(k) directly into another 401(k) or into an IRA without the money ever coming directly into your posession.

Check me out on that, because I might be wrong. But if I'm right, then you may as well do whatever you please with the proceeds.