Question regarding distribution,

[Guest termy]

I am considering cashing out of a JP Morgan 401k account ($10,000) from a previous employer to pay off high-interest credit card debt. I understand that the early withdrawl will be subject to 20% federal tax withholding, a 10% early withdrawl fee and will be also taxed as income at the end of this year.

I'm wondering if there are any other fees that will be withheld at the time of distribution for state and/or local taxes. I live in Massachusetts.

Appreciate any help.

Paul

[Guest Guest99]

I believe MA is a mandatory w/holding state, so yes there will be state taxes withheld (it should list the mandatory w/holding states on your distribution form). Also, you might get a $50-$75 fee for processing the distribution.

[Guest b2kates]

Mass is a mandatory withholding state at the rate of 5/3%; but may be reduced by the filing of form M-4P

[Guest Ellymae]

Paul, it is true that 20% Federal taxes will be withheld, however this withholding will show up on the 1099 you get at the end of the tax year. The 401(k) distribution is taxable, however you are not taxed twice. You will report the amount on the 1099, and also the taxes withheld that show on the 1099 as well. If 20% was not enough for your tax bracket, then you'll pay additional taxes, however in some cases 20% is too much. You will be assessed the 10% early withdrawal penalty if you are under 59 1/2, however that will not be withheld from your distribution, it will show up when you file your taxes.

Ellymae