Can I deduct from my 401K to pay taxes due to the IRS without a penalty?
Posted by Dolores
kimberly03051 asked:
I owe the IRS 7K for taxes this year. The money I owe is for taking an early withdrawal from our 401K to fix the bathroom. I’m not sure it counts as a hardship, but the bathroom was mold infested and needed to be gutted everything replaced. Can i take more money out of my 401K to pay the taxes due and not have to incurr another penalty?
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I owe the IRS 7K for taxes this year. The money I owe is for taking an early withdrawal from our 401K to fix the bathroom. I’m not sure it counts as a hardship, but the bathroom was mold infested and needed to be gutted everything replaced. Can i take more money out of my 401K to pay the taxes due and not have to incurr another penalty?
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October 4th, 2009 at 9:08 am
Kansieo.com
Sorry, no, you will incur another penalty. Better to borrow against your 401K (and not withdraw). Borrowing money is not a taxable event because, in theory, you have to pay it back (typically with some interest). Check your plan out, I bet you could do it that way.
October 4th, 2009 at 12:01 pm
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Taking money from your 401k means double tax. You get taxed everytime you borrow. Remember when you pay it back and take it during retirement, you get taxed again!
October 6th, 2009 at 7:42 am
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Not if you aren’t at least 59 1/2, sorry. Withdrawing from a 401k or traditional IRA early is almost always a bad proposition. Consider getting a small home equity loan, assuming of course that you have equity in your home.
October 8th, 2009 at 11:34 pm
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No. It does not count. ONLY under certain circumstances can you ‘borrow’ against your 401K (first time home buyer, etc).
If you take more money out of your 401K you’ll get HIT AGAIN. Don’t you realize this? Your 401K is set up for long term investment that is not like a bank account.
You should have financed the bathroom remodel with a different method. You would have been better to finance it, and then take the tax deduction when you sold the house as home improvement.
You need to get better tax advice NOW.
And you should NOT owe the IRS money - that early withdrawal penalty was taken out when you withdrew the money (witholding).
If you do not have the money to pay your tax, you should contact the IRS asap and set up a payment schedule.
October 10th, 2009 at 12:25 am
401K
No.
October 12th, 2009 at 11:57 am
Website content
No, you owe the penalty on the first withdrawal, and if you take more out to pay the tax, you’ll pay a penalty on that also.
October 12th, 2009 at 4:55 pm
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no
October 15th, 2009 at 5:40 pm
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as others have said…the answer is no. I’m wondering how you got the money out to begin with. As bad as this sounds…mold infestation isn’t a reason to allow for an in-service withdrawal.