Employee-sponsored k savings accounts allow you to save for retirement while deferring your income tax liability on the funds added to the account through direct contributions, payroll withholding and employer contributions.
When funds are withdrawn from the account, you must pay income taxes at your current tax rate on the total withdrawal. Because payments received from your k account are considered income and taxed at the federal level, you must also pay state income taxes on the funds. The only exception occurs in states without Liquidating 401k taxes in florida income tax.
Your k plan may offer you the opportunity to have taxes automatically withheld from a withdrawal. If you are unsure if your account offers this option, contact the administrator.
If you live in a county or city that levies a local tax on income, your withdrawal from a k plan is subject to taxation at the local tax rate as well. Many local income tax districts have their taxes collected when you file a state income tax return, so you may not have to file an additional return to pay this tax.
In most circumstances, an early withdrawal triggers a penalty equal to 10 percent of the withdrawal amount. The IRS allows for hardship exceptions that allow you early access to your k funds without the 10 percent penalty.
If you or a member of your immediate family needs access to medical care, you may withdraw funds without penalty. You also may withdraw money to purchase a principal residence, to save it from foreclosure or to make certain types of repairs to the property. Withdrawals also are allowed for education expenses that belong to you or a member of your immediate family within the next 12 months and can be used to pay for a funeral for you or a member of your immediate family.
While you do not have to pay the 10 percent penalty on these withdrawals, it is important to note that you still will owe full income taxes. For the purposes of early k withdrawals, consider your immediate family to consist of you, your spouse,
Liquidating 401k taxes in florida, other dependents and your beneficiary.
She is a full-time government and public safety reporter for Gannett.