Discussion:Early Distribution of 401K after client retired at AGE 55!!!
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Discussion Forum Index --> Tax Questions --> Early Distribution of 401K after client retired at AGE 55!!!
Donniecastleman (talk|edits) said: | 12 November 2008 |
| Eesh, someone came by for me to take care of a return they had already filed back in Chicago for them, a CP-2000 was received after the fact, and when they initially came by and the papers were filed they initially said they had medical exception to take out the money after they retired from their job at age 55, now the only thing they will say is that a guy at a bank advised them to take out their 401K and put it in their bank in CD's and money market funds. I know what the answer to this question is already but I told them I would put the question out there, and I do what I tell people I will do, but is there any possible way to fix this situation? They cashed out 87,000 and had 16k withheld at the 20% (just estimates) bought a truck and put the rest in different products at a bank, if there's exception or a way to fit it they have to pay in 4500 extra from now including the 1099R on their return, if no exception they will owe 11K, thanks for any discussion. | |
Death&Taxes (talk|edits) said: | 12 November 2008 |
| I presume you are talking about the penalty for early withdrawal? Obviously they must pay the tax on monies taken out and not rolled over, but check out the exception from penalty for separating from service in the year they turn 55, or later, for a pension, 401K and anything but an IRA. My wife received a CP-2000 listing the penalty because trustee put "1" as the explanation in Box 7, 1099R, but she had left service and was 57 at that time. | |
Donniecastleman (talk|edits) said: | 12 November 2008 |
| No IRA's, just CD's. | |
| 12 November 2008 | |
| Assuming the distributions were made after separation from service, there would be no 10% penalty in this case. | |
Donniecastleman (talk|edits) said: | 12 November 2008 |
| Thanks guys! | |
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