Accountant Forums


Reply
Thread Tools

401K - special tax break for unemployed?

 
 
John Smith
Guest
Posts: n/a
Thanked:
 
      06-10-2010, 05:54 PM
I'm between 50 and 55 years old and have been unemployed for a
year. 401K is now my last resort. Any way to avoid penalty or tax
when I withdraw from 401K? Thanks a lot.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
Reply With Quote
 
 
 
 
Alan
Guest
Posts: n/a
Thanked:
 
      06-10-2010, 07:40 PM
On 6/10/10 11:54 AM, John Smith wrote:
> I'm between 50 and 55 years old and have been unemployed for a
> year. 401K is now my last resort. Any way to avoid penalty or tax
> when I withdraw from 401K? Thanks a lot.
>

Here are two exceptions you may qualify for.

1. If you are a qualified public safety employee, distributions made
from a governmental defined benefit pension plan are not subject to the
additional tax on early distributions. You are a qualified public safety
employee if you provided police protection, firefighting services, or
emergency medical services for a state or municipality, and you
separated from service in or after the year you attained age 50.

2. A distribution from a qualified retirement plan to the extent you
have deductible medical expenses (medical expenses that exceed 7.5% of
your adjusted gross income), whether or not you itemize your deductions
for the year.

You can find the full list of exceptions in IRS Pub 575:
http://www.irs.gov/publications/p575...link1000226952

Please note that you should not confuse the exceptions for an IRA
distribution with the exceptions for a pension distribution. They are
not the same.



--
Alan
http://taxtopics.net

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
Reply With Quote
 
 
 
 
Tom Russ
Guest
Posts: n/a
Thanked:
 
      06-11-2010, 04:18 PM
On Jun 10, 12:40*pm, Alan <(E-Mail Removed)> wrote:
> On 6/10/10 11:54 AM, John Smith wrote:> I'm between 50 and 55 years old and have been unemployed for a
> > year. 401K is now my last resort. Any way to avoid penalty or tax
> > when I withdraw from 401K? Thanks a lot.

....
> Please note that you should not confuse the exceptions for an IRA
> distribution with the exceptions for a pension distribution. *They are
> not the same.


But presumably since the OP is unemployed, he should be able to roll
over the 401K into an IRA. And that would then qualify for the IRA
rules, right?

IIRC there is the "substantially equal payments" exception that would
allow penalty-free (but not tax-free) withdrawals. The OP would have
to continue the withdrawals until age 59 1/2 or for 5 years, whichever
is longer. And the payment schedule can't be changed once started
without penalty consequences.

There is no way to avoid regular income taxes on withdrawing from a
401K or IRA. Well, if some of the contributions were after tax
contributions -- not very likely -- then a portion of the withdrawal
might not be taxed.)

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
Reply With Quote
 
 
 
Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Personal accounts used for business Tybow759 Quickbooks 2 08-26-2013 03:22 PM
Suggestion for Improvement Ken Blake Quicken 19 04-06-2013 06:42 PM
Bank charges included as payment for tax JennJenn General Accountancy Discussion 2 04-06-2013 04:01 PM
local or big companies for retirement and TOD itchyneebanshee@hotmail.com Financial Planning 0 04-05-2013 10:12 PM
When Is a Tax Break Not a Tax Break? William Brenner Tax 1 03-25-2007 04:45 PM


All times are GMT. The time now is 04:26 AM.
Posts in this forum do not constitute the advice of AccountantForums.com or its members. Financial advice should always be taken from qualified advisors before committing to a financial decision.