Liquidating 401k to pay back-tax debt?
Asked Sep 23, 2007, 05:03 PM
Long story short. I am trying to clean up my credit, and resolve back taxes with the IRS. The interest and fees now higher than my tax debt.
I do have a tax attorney that is working with me and the IRS. I want to pay the IRS asap once I know the amount, about $12,000. The IRS is willing to take $250.00 per month. I am fine with that, but it will take me forever to pay it off.
I have 2 401k accounts. 1 is with ML, $20,799.63... $9,983.55 of which includes a general purchase loan I am paying on though my employer though I no longer contribute, because we are a "new company" now and my company has a different 401k and I contribute to that one now which is about $18,000.
Can I close the ML account and use the money to pay my back taxes, or at least most of the debt paid so that my monthly payments get paid much much sooner. According to the IRS guidelines and other sites I have looked at, this is not a hardship. I would like to close (liquidate) the account completely. I may be wrong, but the penalties are far less than the IRS interest and penalties that are accruing, but I cant find any information on if this is even possible.
I do not want any changes to my current 401k.
Does anyone have advise?