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ceebee226 · Jan 2, 2007, 08:28 PM

In regard to an early 401k withdrawal, can someone advise if the 10% penalty is calculated on the amount AFTER the 20% withholding, or is it on the amount of the original withdraw? (e.g. If you withdraw $10,000 from your 401k early, and the company withholds 20%=$2000; are you then required to pay the 10% penalty on the remaining $8000, or on the original $10,000?)

Thanks

RichardBondMan · Jan 2, 2007, 08:34 PM

Originally Posted by ceebee226

In regard to an early 401k withdrawal, can someone advise if the 10% penalty is calculated on the amount AFTER the 20% withholding, or is it on the amount of the original withdraw? (e.g. If you withdraw $10,000 from your 401k early, and the company withholds 20%=$2000; are you then required to pay the 10% penalty on the remaining $8000, or on the original $10,000?)

Thanks

My best guess is you pay the 10% on the $10M not 10% of the $8M. Others more active and qualified in the field of 401(k)'s will answer also. It's just my best guess.

AtlantaTaxExpert · Jan 2, 2007, 09:22 PM

The tax is determined on the amount of the distribution.

If you withdraw $10K, then $2K is withheld, the tax is determined on $10K, which means you pay federal and state income on $10K, and the Early Withdrawal Penalty is 10% of $10K (or $1,000).