[KatherineS]

Hi,

Hope someone can help me.

I am divorced, will be receiving 1/2 of my ex-husbands 401K. It is valued at $117,000.

I earned $30,000 last year. I have sole/physical custody of my 3 children. I am 46 years old.

I am in school full time. I need the funds from the 401K to pay off attorney fees, tuition, etc. In fact once all is said and done, I will have nothing left to live on. Is there anything that I can do to ease the tax pentalties.

i.e: Give each child $10,000, or pay for college both for myself and daughter etc... the pentalites are unbelievable and I need all the money I can get to pay off divorce debts etc..

Thank you for your time.

KatherineS

[MukatA]

There is no inheritance tax, but the withdrawal will be treated as income on which you must pay federal and state income taxes.

[ebaines]

KatherineS: Not sure what you mean by "receiving" half of the 401(k) - do you mean that your ex will be making a withdrawal from his 401(k) and directing it to you? Under the rules a distribution to an "alternate payee" (that's you) under a qualified domestic relations order is NOT subject to the 10% early withdrawal penalty - so that's the good news - but IS subject to regular income tax. What penalties are you referring to (other than income tax)?

[AtlantaTaxExpert]

KatherineS:

Agreed; the QDRO distribution is NOT subject to the 10% Early Withdrawal Penalty, but IS subject to normal income taxes, which will be about $25,500 after exemptions and the standard deduction. Your income level precludes you from claiming the $1,000 Child Tax Credit or any tuition credits.

That means your gross income is $147,000. Your income tax liability on this, based on HoH with three dependents