[Tonya1]

Will I get any of the tax I pay on the cash out of my 401k?

[MukatA]

401K cash out will be treated as income on your tax return. If it is early cash out, you will pay pay 10% penalty.

[AtlantaTaxExpert]

Tonya:

The 20% that the 401K custodian is required to withhold and send to the IRS is only a down payment of what the actual tax liability will be.

First and foremost, you will pay the 10% Early Withdrawal Penalty. This 10% penalty CANNOT be mitigated! That means that, even if you have deductions and credits that completely offsets the distribution and all other income that you owe no income tax on your 2010 tax return, you will still pay the 10% penalty!

Then the distribution amount will be added to your income and taxed at your marginal tax rate. Your marginal tax rate is the tax rate you pay on the LAST dollar you earned in 2010, which is at least 15% and may be as high as 35%, though most likely is 25%.

You will also have to pay STATE income taxes on the distribution, which can be as high as 13%.

So it is conceivable that your total tax liability on the 401K distribution could be as high as 58%, but will be AT LEAST 25%.

BOTTOM LINE: If you can avoid taking an early distribution from your 401K, AVOID IT, because the eventual tax bill WILL HURT!

[ScottGem]

I'm not sure what your question is. If your company took withholding out of your 401k distribution then whether you get any of that back or not depends on your tax liability. It's the same as the amounts withheld from your pay. When you file your return you calculate your total tax and subtract the total withholding.

Except, as noted you must pay the 10%.

[wnhough]

QUOTE," Will I get any of the tax I pay on the cash out of my 401k?"---Fundamentally, aas you can see, a 401K retirement plan is a specific, legal structure. Unlike a normal savings account, your 401K account is monitored by both your employer and the IRS. Whenever you make changes to this account, including withdrawing funds, you must do so according to the laws governing your account.
So, withdrawing cash or other assets such as capital stock from your 401K plan ( also known as a 401k cash out) before the minimum age of 59.5 y.O. is a taxable event because your 401k salary deferrals were not subject to income tax after the minimum age.(But remember;even withdrawals permitted before the minimum age are subject to a 10% tax, except for deductions to employees for certain medical expenses.
The IRS Tax Code does allow for hardship withdrawals under certain conditions.i.e. using funds for a down payment on a primary home, or to avoid foreclosure and eviction. Educational expenses for the employee , or etc.
The standard penalty for early withdrawal from your 401K is 10%. The 10% is taxed only on the funds you withdraw. However, this can amount to a large loss if you take out a lot of money or make frequent withdrawals.
"do you get the tax you pay on your 401k cash out back the following year"---No. The eaarly withdrawal from you r401K plan is treated as your inocme and you need to pay early penalty(10%), Federeal tax and even state tax(if applicable). For instance, if you are taking $30,000 and are in a 20 percent tax bracket in a state with 5 percent income tax( assume if it is appliacable), your $30,000 withdrawal will net you less than $20,000( actually you get only $19,500). You lose $3000 for the penalty($30,000*10%), $6000 for the federal income tax($30,000*20%) and $1500,($30,000*5%) for the state income tax.