[lisamorande]

Hello, I would like to know when you take out your 401K money, do you have to pay the penalty right away or can you pay it at a later date. When I say right away, meaning during tax time. Please advise Thank you, Lisa

[Askaboutme]

In order for me to answer this question effecitvely I need to know what kind of withdrawl are you taking, is it a loan? Hardhip W/D? If it is a loan there is no penalty as you are paying yourself back with interest. However the only time a loan is penalized is when the loan goes in default, EX: if you were too loose your job, and you currently had a loan through your 401k you would have a certain amount of days in order to repay the OLB ( outstanding loan balance) if you do not then it would go into default and any unpaid balance that you haven't paid back would bare tax penalities. If it is a hardship w/d then there is a mandatory withholding, depending on your state there are some states who also hold a mandatory tax. But in most retirement plans you can't make any Hardship w/d until you have exhausted all other available funds.. . So your first and best option would be a loan..

Hope I helped

[ebaines]

If you take a withdrawal the plan administrator will automatically withhold 20% for taxes. This is NOT the 10% penalty, just regular income tax. When you calculate your taxes for the year you include the withdrawal as income, and the 20% amount withheld as taxes already paid. If this withdrawal is an early withdrawal (you are less than 59-1/2 years of age), you must also include the 10% penalty as additional taxes owed on line 60 of the From 1040. So to answer your question - you pay the 10% penalty when you file your taxes for the year. Hope this helps.