The company I worked for closed April,2005 and we were given our entire 401k balance. I have no plans to roll this over. I have placed 30% into a savings acount because I know I must pay
20% tax and 10% penalty. My question is:

Is the tax and penalty due now or can they both be done at tax time next year? Any info on this is greatly appreciated.

Zazzers:

You still have time to roll this over into an IRA (you have 60 days from the date of the distribution), and I strongly recommend you do so!

When you factor in your marginal tax rate, the state income taxes and the 10% early withdrawal penalty, you could pay up to 50% of the distribution in taxes.

By rolling it over into a rollover IRA, you then will have time to review your options in detail before making any decisions. If circumstances dictate that you take the money, you can then withdraw the minimum amount needed from the rollover IRA.

If you insist on not using the rollover IRA option, then make an estimated payment to the IRS by 15 June 2005 using Form 1040-ES. Send the entire 30%! It will not be enough, but it's better than nothing!