This may sound like a stupid question, but, please understand that I am an artist -- not a money person. If you take an early withdrawal from a 401K plan, pay the 20% state and federal tax before receiving the disbursement, how do you claim all this on the tax form? Can you use the EZ forms or do you have to use the long forms and itemize. I ask this because I never have enough to itemize, therefore us the short and EZ forms. Thanks in advance!

AtlantaTaxExpert

The 20% withholding is ONLY a down payment.

The actual tax liability can be as high as 49%, depending on the state in which you live and your marginal tax bracket.

You must use Form 1040 to file. You will get Form 1099-R for the 401K plan distribution.

If you have NOT already done it, think LONG and HARD before you take that 401K distribution. It is a VERY EXPENSIVE process.

If you must close the 401K due to no longer working at the company, ROLL IT OVER into an IRA. Any bank or brokerage firm will be EAGER to help you do it!