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Jbert · Feb 7, 2007, 07:21 PM

I had an unexpected 401K distribution with no withholding that will wreck tax year 2006. Can this disbursement be postponed and taken in 2007?

Thanks

Jim

AtlantaTaxExpert · Feb 8, 2007, 12:25 AM

Jim:

WHEN was it disbursed? Exact date!

Jbert · Feb 8, 2007, 06:11 AM

Thanks ATE, just wrote Administrator for loan disbursement date and rollover date of balance if different. Will post ASAP

Jim

ScottGem · Feb 8, 2007, 07:18 AM

I'm confused. You don't know the dates? Also if this was a rollover, then there is no tax liability. Did you get a 1099R?

Jbert · Feb 8, 2007, 07:38 AM

Scott Gem,

Thanks, they paid the loan off before the 401K was rolled into an IRA. They took nothing out of the $15321.01 loan payoff. Yes I got a 1099R. Also when I did a Tax mock up the program added a 10% on line 4 of form 5329. That hurt as it was a add on after taxes were figured.

I am not sure but I hope my awarded disability will cover all of 2006. Then that 10% may can be taken out.

For sure this has been a tax nightmare for me as I took 20% W/H out of all distributions but they could not cover this large $15321.00 added on.

Thanks so much

Jim

ScottGem · Feb 8, 2007, 07:45 AM

Ahhh so there was an outstanding loan at the time of the distribution. Yes, that would be considered a withdrawal. And yes a 10% penalty would be added to the withdrawn amount as well as having it added to your taxable income for 2006.

As long as the distribution date was in 2006 then it goes for that tax year and you can't defer it. The 1099R shows the taxable year.

If you left your job due to disability, you may qualify for a hardship withdrawal. That would at least get rid of the 10% penalty.

Jbert · Feb 8, 2007, 08:30 AM

The job said I was a risk to the work environment and that is why they fired me. That was in Feb2006, I immediately applied for Disability and was accepted. There is a 5 month waiting period and my payments began in Aug 2006. So I am hoping that being awarded in Feb before any distributions were made, I can take that 10% off my tax form.

Thanks SG

Jim

ScottGem · Feb 8, 2007, 08:35 AM

That's really not the issue. The issue is whether you can qualify for a hardship withdrawal. Did you have medical bills relating to your disability? That's one of the few qualifying reasons.

I would really suggest consulting a tax specialist this year instead of using a program. You have some special needs that they can help with.

Jbert · Feb 8, 2007, 08:42 AM

You are probably right on the Tax Specialist for this year, thanks

Jim

ScottGem · Feb 8, 2007, 08:43 AM

Good luck

AtlantaTaxExpert · Feb 8, 2007, 03:10 PM

Good conversation.

The reason I asked for the date was not valid.