Has anyone ever done this?
Is there any Federal Tax penalty?
How to go about recognizing it on tax returns?
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1|1|Answers inside.....|Abbicca|Abbicca@insightbb.com|14:52:02|01/25/2012|
OK... I am assuming you have not reached age 59 and a half yet. If you have not, then there IS a 10% penalty AS WELL as tax issues. It gets put in with your normal income and taxed at whatever rate you hit (mind you this CAN bump some of your income into a higher bracket.). So you'll pay normal taxes PLUS 10% penalty. And each state is different on their taxation of IRA's, pensions, annuities, etc....so you'll have to check on that.
There ARE some exceptions to having to pay the 10%..I suggest looking at IRS form 5329 AND it's instructions to find out if you'd qualify. Also, some 401K's allow for loans to be taken and repaid..... you might see if that is an option. Or you could roll it into an IRA if this is just due to changing jobs.
That's the short answer...LOL. HTH