Does anyone like a challenge? Lol As you can tell by the title a lot of changes in ’06…I reside in NH but work in MA and collected unemployment in Mass...

1. Laid off 1/4/06…Got residual hourly rate of $1500 GROSS, commission of $500 GROSS and annual bonus of $1000 GROSS…
2. Cashed out 401k…$5600 cash out, collected $4500 net and paid off my car…
3. Collected $14K in unemployment…Did NOT have taxes taken out…
4. Got married in March…
5. Got a temp sales job, projected to make $6760 gross in hourly wages and $1700 GROSS in commission…I filed zero which translates to 19% being taking out for taxes…
6. Joined the military and leave at the end of September… I will make a prorate $167.72 for sept and $1198/mo Oct-Dec…($3761 GROSS for ’06)

I just don’t want to owe at the end of the year…At both jobs and with unemployment I made $25,460…With the military I’ll make $3761 GROSS, so I’m making just under $30K minus the 401K…

How much will I owe for the 401k penalties? I've heard it's 10-35%, how can I figure out which it is?
How does commission/bonus’s get taxed vs hourly rate/salary?
Does military pay get taxed? I will be training in both TX and Miss if that matters…

Thanks

Just for the record, I had a much different title, for some reason the title was majorly shortened??

That's a major tax analysis. It would be the equivalent of actually preparing your 2006 tax return. Sorry, even in the off-season, I cannot do that kind of work without compensation. If you want to pay for an analysis, contact me at [email protected].

General free advice:

- Expect to pay about 25% on the 401K cash-out.

- Your commission is normally considered self-employment income, which means you will need to file Form 1040 with a Schedule C and SE. You will be able to deduct all kinds of work expenses, but expect to pay about 30% of your commissions in self-employment taxes (15.3%) and federal income taxes (15%), plus about 5% to NH.

Yes, military pay IS taxed (unless you are deployed to Southwest Asia (Iraq, Kuwait, etc.), but your housing and food allowances are NOT taxed. The state you lived in when you joined is considered your home state. Not sure how NH taxes military pay (every state is different), but it is best to assume that it is similar to how the IRS taxes it. Where you train is irrelevant.

Great advice, thank you!

I agree with ATE that you are asking a lot for free. But I can partially answer the 401K question. You state you received a Net of $4500 on a $5600 cashout. I'm assuming those are rounded numbers. Your company should have withheld 20% ($1200) which would have netted you $4400. That would also mean you will owe the 10% penalty for early withdrawal. So you need to come up with $560 for that.

You will need to determine what your effective tax rate will be. That's how much, in taxes, you will owe on the 401K distribution. If your tas rtate is less that 20% then you will be in the clear there. If its more, then you will owe the difference between your tax rate and the 20% withheld.