I have a real problem. I am in construction. As many of my co-workers it has been a rough ride this last 2 years. Last year it got so bad that I had to take money out of my 401 to survive. I actually was reducing the value faster then the economy was. All in all I used $90,000 to survive, keep my house, keep my family fed and educated. Now I have to face the government. Fortunately I have been working the last 4 months and have a good job that will last well into 2012. I want to know if anyone has had any success in finding a program to repay the funds I have taken and possibly, hopefully avoid the bite of the 10% kick in the butt for borrowing my own money? I might sound like Im making light of this situation but Im really looking for some help. I did, when withdrawing the funds had my broker withhold what I hoped to cover my costs but I just found out during a trip to my accountant I owe $17,000.00. I was hoping that somewhere out there someone could help me find something. Please feel free to e-mail any suggestions, leeds, or contacts you might have for this problem. Thanks.

No way to avoid the 10% penalty, sorry. But I'm a little confused - you wrote that you "borrowed your own money" - if you mean this literally, meaning you took a loan against your 401(k) as opposed to taking witjdrawals, then no taxes or penalties are due. I'm guessing you really didn't mean to say that you borrowed from your account, but rather took withdrawals, but please confirm.

As for what to do if you can't afford to pay the taxes and penalties you owe - the IRS is willing to work with you to stretch out your payments. See: Payment Plans, Installment Agreements (http://www.irs.gov/businesses/small/article/0,,id=108347,00.html)

If you made 401K withdrawals, you have 60 days to roll the money over into a rollover IRA, or to return it to the 401K. Assuming 60 days has long passed, then what ebaines said is unfortunately tue: you are stuck with the 10% penalty plus taxes by the IRS and state.

No way to avoid the 10% penalty, sorry. But I'm a little confused - you wrote that you "borrowed your own money" - if you mean this literally, meaning you took a loan against your 401(k) as opposed to taking witjdrawals, then no taxes or penalties are due. I'm guessing you really didn't mean to say that you borrowed from your account, but rather took withdrawals, but please confirm.

As for what to do if you can't afford to pay the taxes and penalties you owe - the IRS is willing to work with you to stretch out your payments. See: Payment Plans, Installment Agreements (http://www.irs.gov/businesses/small/article/0,,id=108347,00.html)

I was being sarcastic. But in reality it is my money and If I did the same thing through an employer (I was one of 30 million unemployed) It would not be assessed the 10% penalty. That seems very unfair since if I were employed I wouldn’t have needed to use the money

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NEVER confused taxes and fairness, because NO ONE has EVER said the tax laws are fair, simply because fairness is principally a matter of perception.