I know that there is a 20% penalty on cashing out my 401K. Do they have to take it out right away or can I pay it at the end of the year with my taxes?

I know that there is a 20% penalty on cashing out my 401K. do they have to take it out right away or can I pay it at the end of the year with my taxes?

Actually it's a 10% penalty for early withdrawal, not 20%, and yes - you pay it at the end of the year when you file your taxes. However they will automatically withhold 20% from the withdrawal for income tax purposes - this amount is NOT the penalty, but rather an installment on the income taxes owed. And also be aware that depending on where you live you may also have to pay state/local income tax as well - any state/local taxes are NOT automatically withheld from the distribution, so be prepared to pay them separately.