I have a tax bill that I don't have cash to pay - but there is money in my 401(k). I WANT the IRS to tap into it to pay the bill - is that possible?
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I have a tax bill that I don't have cash to pay - but there is money in my 401(k). I WANT the IRS to tap into it to pay the bill - is that possible?
Hardship rules for early withdrawal are here :
401khelpcenter.com - Hardship Withdrawals Give Access to Your 401k Savings, But at a Cost
Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence.
This withdrawal would come with a penalty and your employer is not required to allow this withdrawal. Some 401Ks have provisions to take loans against them . They are generally below the rate you would get from a bank loan. Contact your employer for details .
It is possible for the IRS to issue a levy against your 401(k) for back taxes, and if this happened you would not owe the usual 10% withdrawal penalty. The IRS normally goes after other assets first. I would bet that by the time your back taxes have gotten so bad that the IRS has to resort to this I suspect that what you owe the IRS in penalties and interest is far above the 10% early withdrawal penalty.
Take a loan against your 401K. That will be better than incurring the penalties of a withdrawal.
You do not want to cash it in, nor do you want to lose your savings in that account.
I will assume this is a one time event where you did not properly have enough taxes paid in during the year for some reason. So you take a loan out against your account, and pay it back to rtain your retirement account. You can not or should not few this as a bank account to take money out of for various reasons, it is a long term savings plan to help at your retirement.
Also be sure you have your withholdings correct at your job, or if self employed you are filing quarterly and saving back money from each job you do to pay toward taxes
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