Ask Experts Questions for FREE Help !
Ask
    bumjmud's Avatar
    bumjmud Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Jan 26, 2009, 09:15 AM
    Proof for 401k early disbursment use
    We recently built a house and needed some cash, so I dipped into my 401k for it. What do I need as proof for using the money for the construction. Also, my bank withheld the tax money. So how do we file with that?
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
    Computer Expert and Renaissance Man
    		  
    #2

    Jan 26, 2009, 10:17 AM

    What do you think that proof will get you?

    Its not going to change the tax liability or penalty on the withdrawal.
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
    Expert
    		  
    #3

    Jan 26, 2009, 10:49 AM

    You do not need any proof regarding what the money was used for - it doesn't matter. The bank is required to withhold 20% for taxes. They will send you a 1099-R form that lists the amount of the withdrawal and the amount withheld. You report the distribution as follows:

    1. You report the full amount of the withdrawal on line 16 of your 1040 - "Pensions and annuities."

    2. You include the 10% early withdrawal penalty on line 60 of form 1040 - "Additional tax on IRAs, other qualified retirement plans, etc."

    3. The amount that was withheld for taxes you report on line 64 - "Federal income tax withheld from Forms W-2 and 1099."
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #4

    Jan 26, 2009, 12:08 PM
    What Scott and ebaines said is correct.

    Unfortunately, you made a common mistake: you assumed that withdrawing money from your 401K for the first-time purchase of a home makes you exempt from the 10% Early Withdrawal Penalty.

    That is true ONLY IF the withdrawal is from a traditional IRA. It does NOT apply for withdrawals from 401Ks.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Early 401K withdrawal [ 4 Answers ]

My wife signed a form saying she would not withdraw funds from her 401k until retirementHow can we get her money out of this fund? We are aware of the penalties for earlt withdrawal, we need the money.

Early 401K Withdrawal [ 4 Answers ]

In 2006 I was employed by a company with whom I had a 401K. That year I took out a loan for $20,000 to use for a real estate investment. In early 2007 I left that employer so the balance of that loan became an early withdrawal. In the latter part of 2007 I cashed out the remainder of the 401K...

Disbursment of 401k to non-spouse beneficiary [ 2 Answers ]

I've just been informed I was still named as beneficiary on my ex-wife's 401k retirement plan at work. She passed away unfortunately this year. Her daughter has informed me as to my beneficiary status and asked that I give her and her surviving son the funds in the account. When we divorced...

Early 401k Withdrawel [ 1 Answers ]

I would like a total distribution of my 401k. I am still employed and under the age of 59 1/2. Merrill Lynch is trying to tell me I am not eligible, therefore refusing to give me my own money. I understand the 10% penalty, fine. Reasons I seek to cash out are not relevant. I just want my...

401k Disbursment Delima [ 1 Answers ]

Hello all I am 37 and I took a loan from my 401k (bad move on my part, never do that again) figuring I wouldn't be leaving the company for a while. Well it end up I did for another job. I now owe $8300 or be taxed and pay penalties. What I am wondering is what would the tax and penalties be in...

View more questions Search