In regard to an early 401k withdrawal, can someone advise if the 10% penalty is calculated on the amount AFTER the 20% withholding, or is it on the amount of the original withdraw? (e.g. If you withdraw $10,000 from your 401k early, and the company withholds 20%=$2000; are you then required to pay the 10% penalty on the remaining $8000, or on the original $10,000?)

Thanks

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Originally Posted by ceebee226

In regard to an early 401k withdrawal, can someone advise if the 10% penalty is calculated on the amount AFTER the 20% withholding, or is it on the amount of the original withdraw? (e.g. If you withdraw $10,000 from your 401k early, and the company withholds 20%=$2000; are you then required to pay the 10% penalty on the remaining $8000, or on the original $10,000?)

Thanks

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My best guess is you pay the 10% on the $10M not 10% of the $8M. Others more active and qualified in the field of 401(k)'s will answer also. It's just my best guess.

The tax is determined on the amount of the distribution.

If you withdraw $10K, then $2K is withheld, the tax is determined on $10K, which means you pay federal and state income on $10K, and the Early Withdrawal Penalty is 10% of $10K (or $1,000).