I'm a 37 year old male.......single (not married).....factory worker for about 19 years..........took out a 26K 401K hardship withdrawal last year. Out of the 26K, they sent me a check for 22K and some change.......This means they kept about 4K. If my salary was 33K, not counting the withdrawal money, what am I going to owe in taxes in April? Thanks, Marty

AtlantaTaxExpert

Given the data you cite, and NOT counting the $4K that was withheld, your federal income tax is $10,001. That include the 10% Early Withdrawal Penalty.

What exactly was the withdrawal for?? And what state are you living in?

engrebuilder

Home purchase.....Ky.

AtlantaTaxExpert

Pity! If you had rolled the money into an IRA, you could have withdrawn the money, and $10,000 of it would have been EXEMPT from the 10% Early Withdrawal Penalty under First Time Buyer exemption.

engrebuilder

Thanks......I usually get back between 1200 and 1500 from Federal each year, plus I also have an extra 5.00 taken out for federal taxes each week. WIll this offset the 10K bill by much?

AtlantaTaxExpert

Well, you have already had $4K withheld, so the actual tax due is about $6,000.

Still, you better plan on making payments in a tax payment plan for a few years.

engrebuilder

So, just so I understand............your normal refund amount won't really offset what you would owe? Like, you owed 10K, they already took 4K......you owe 6K, but you were getting a 1200.00 refund, so you now owe 4800.00......?....You see where I'm going here? I would owe 6K regardless of if I would have had a refund or not? Isn't the normal deduction 4 or 5K? I totally trust your info, I'm just easily confused with this stuff.......Thanks again!

AtlantaTaxExpert

The $5,150 standard deduction was already factored into my tax calculations.

Your tax liability before ANY withholding was $10,001, They withheld $4,000 from the 401K distribution, so your tax withholding from your salary has to cover $6,000. Not likely.

Your tax bill will be the difference between what your total federal income tax withholding was and $6,000. Since you have not told what was withheld from your pay, I cannot answer for sure what you will have to pay when you file tax return.

However, based on what you HAVE told me, I think your annual withodling is about $4,000. If I am right, you will have to pay about $2,000 when you file your tax return.

If I were you, I would start saving right now. You have until April 15th to collect the money to pay the tax bill. Otherwise, you will have to pay on a payment plan.