I cashed in my 401K. I had them take out 35%. Should this cover all taxes? I live in Alabama. Or am I still going to owe more when I file? The 35% covers the penaty also.

RichardBondMan

You probably know this but it would have been better to have known the tax consequences before surrendering your 401k for it's value. I think you (or a tax preparer) first have to calculate your income taxes for both AL and the IRS for the tax year and, of course, when doing so, you may need to include as "earned" income not only your actual "earned" income from your employment, interest, dividents, ect but also the proceeds from the 401k distribution provided unless you were past the age of 59 1/2 at the time of the distribution. You did not mention your age or whether or not you have or do not have earned income, etc. but even if you did, tax laws are complicated and may involve factors too numerous to mention here and tax regulations unique to your specific situation, therefore, unless a CPA or other tax professional is reading this and then responds with other questions for you, I think it highly unlikely that you will receive a satisfactory answer.

AtlantaTaxExpert

I would need to know your total income picture to answer!

MukatA

Early withdrawal is subject to 10% penalty except for the purposes allowed by the IRS. Also, the the withdrawal will be taxed as your regular income.
Now for example, for a Single the taxable income from $31,850 to $77,100 is taxed at 25%. So by adding 401k withdrawal if the gross income exceeds $85,850 ($77,100 plus deductions $8,750), only then the person will be in 28% range.
So you decide yourself if 35% covers the penalty also.

AtlantaTaxExpert

Well said, MukatA!

btk

It sounds like I would be in the 25% tax bracket. Thank you so much for your advise. Hopefully, I'll be covered.

AtlantaTaxExpert

Glad to help!