Well I took the advise of an employee for a CPA. Bad choice. So, needless to say, I now owe money to the IRS through an audit. Im an idiot I know.

But I read somewhere that if you cash out your 401k and pay the IRS the second 10% that goes to Uncle Sam is not taxed? Is this true? Because it sounds too good to be true. I know that there will be the 10% for early withdrawal no matter what.

Thanks!!

Second 10%?? When you take an inservice withdrawal, you need to pay taxes on the amount you withdrew. Its added to your regular income so you pay taxes on it at your regular tax rate. In addition to that, you will also need to pay a 10% penalty.

What you are thinking about is an IRS levy on your 401K to pay the taxes.

If the IRS issues such a levy, then (and only then) is the 10% Early Withdrawal Penalty waived.

If you do it on your own, you WILL owe the penalty.