Hello,

I am trying to confirm something for my brother.

In 2006 he did an early withdrawal from his 401k of $5,000.00 to go towards his daughter's first year of college tuition.

What ax liability his he facing?

He will face normal taxes (state and federal) on the distribution plus a 10% Early Withdrawal Penalty.

Had he transferred the money to a rollover IRA, THEN withdraw the money, he could have avoided the 10% penalty. Unfortunately, that option only applies to IRAs, not 401Ks.