401k withdrawal question?

Question

I have a 401k less than 5k in it. I am no longer employed and don't plan on working right now so for this year I won't be filing taxes. I know about the penalty of cashing out my 401k and also paying taxes on it when I file. So my question is if I'm not filing taxes how can I pay additional taxes on the money withdrawn from my 401k? I don't really want to withdraw because of the fees and I don't know how to claim it since I won't file taxes. I have thought about opening a roth ira but not sure with a bank,vanguard, fidelity, etc? Any advice. Also it's my money so don't annoy me with rude comments.

Update:

I don't need the money,  I am leaning towards rolling it over

Answer 1

if u dont need the money then i would roll it over, you will wind up paying atleast 35% of it in federal and state taxes.

Answer 2

If you withdraw the money, you won't pay tax on it this year, but  next year. The tax will automatically come out of the amount you get when it's withdrawn--you won't have to pay that part. Have your 401K administrator roll it over for you--you'll avoid all taxes that way. If you don't have an IRA right now, open one so you can roll over the 401K funds. 

Answer 3

If you are just now withdrawing the money - in the month of January - you would not report this as income until NEXT YEAR when you are reporting income from this current year of 2021.

The current tax season is for income made in 2020, so if you haven't taken this money out before the end of December, 2020, then it doesn't get reported on this year.

Now, as far as how to deal with taxes - if you roll it over into a qualifying account within 60 days, you would have no taxes and no penalty taxes.  You could talk to a banker at whatever bank you currently use to find out some of your account options if you aren't sure what type of account you would like to roll it into.

If you do decide to just take the cash without rolling it over, you should be able to have taxes withheld from it when it is withdrawn from your account.  When going through the process of closing the account and getting the money, having taxes withheld should be one of the options for closing out the account.

If you did get this money out before the end of December, and you didn't roll it over, then this income is something that would REQUIRE you to file a tax return.  It is income from a 1099 source and the minimum that requires you to file in that situation is $400.  You are certainly over $400 based on the balance on your account.  This 401K income would be included with the rest of any other income you made during the year that you make the withdrawal in.  It is not a separate filing or event.  

Answer 4

If you withdraw from the 401K, then you will have to file taxes, even if you are not working.

Answer 5

You would have to file.  

Answer 6

Roth is paid with after tax money, you need to roll it into a pre-tax vehicle such as a standard IRA. Fidelity is not a bad one. Unless you are strapped for cash, do that and avoid the tax penalty. If you do cash it out, they will withhold the tax, forcing you to file a return.

Answer 7

If you take a 401k withdrawal, they withhold taxes from it unless you tell them not to.  If you do the withdrawal you will have to file a tax return as that's how the 10% penalty is reported and paid.  If you convert to a Roth in a trustee to trustee transfer, you might not have any tax liability at all since the 10% penalty wouldn't apply.  This might be a good time to do it since you don't plan on having any other taxable income.  It does seem odd though that you wouldn't be considering getting a job this year.

Answer 8

Your plan admin will withhold 20% if you are under 55 years of age.  If this is too much, you will get a refund when you file.  The 401k withdrawal is part of your total income.  You do not file it separately.

Answer 9

HA HA

It is your money.  You chose to "lock it up" until you are age 59.5.

If you take the 401K withdrawal, you WILL be filing taxes because you have to file taxes on the withdrawal.

It doesn't matter what you do with the money, if you withdraw it you will the 10% penalty.

If you had taken the money out in 2020, there would have been no penalty due to the CARES Act changes.

- however, if you were still employed on 12/31/2020 that wouldn't have been an option.

Answer 10

Why not just roll it over so there is no taxable event?