Distribution from 401K

[S T]

Have a Mother (under age 59.5) that withdrew 401K funds in 2011 to pay for an attorney for Child Custody Issues of 3 children.

1099R is a code 1 - so subject to early withdrawal penalty of 10%, I don't see anything in the Exceptions listed in TTB 13-3 that might apply.

Am I over looking something - is there any possibility to have the 10% waived?? It is not a QDRO.

I don't think so, but wondering?

Sandy

[taxea]

The only waivers I am aware of are medical, home purchase and education

[S T]

Hoping - Wishful Thinking

I can find nothing for the exceptions on 5329 for this scenario,

I was so hoping there might be one, it is such a "bad scenario" for this Taxpayer,
Had to fight for Child Custody, No Child Support - settlment was to give up 2 dependent exemptions to ex and limits her to associated Tax Credits - it just goes on and on -

But as the Taxpayer states, she is just thankful that she does have Legal Physical Custoy of her Children - so hopefully with Taxpayer's positive attitude all will work out well for her in the coming years, even if the Tax Code makes no Sense.

My Charity Case for 2011 Tax Filings.

Thanks to those that reviewed
Sandy

[taxea]

It just amazes me how many clients don't ask first before they take money from retirement accounts.

[ChEAr$]

It just amazes me how many clients don't ask first before they take money from retirement accounts.

Well, the real reason they don't ask is that our answer wouldn't persuade or dissuade them either way. They need the money and they need it now.

But I have a jewel of a client expected in this afternoon who is thinking about taking money out of her TSP to pay off a mortgage. (over 59 1/2) I told her I should look at the effects of spreading withdrawals over several years maybe to minimize taxes, i.e. just enough each year to remain in the 15% bracket.

[Gene V]

The only waivers I am aware of are medical, home purchase and education

Taxea--home puchase and education is not one of the exception for 401K withdrawal, only for IRA. not sure about medical expense

[taxea]

Taxea--home puchase and education is not one of the exception for 401K withdrawal, only for IRA. not sure about medical expense

yes let me be more specific with my answer...insert: with the various retirement accounts.

[Burke]

Well, the real reason they don't ask is that our answer wouldn't persuade or dissuade them either way. They need the money and they need it now.

But I have a jewel of a client expected in this afternoon who is thinking about taking money out of her TSP to pay off a mortgage. (over 59 1/2) I told her I should look at the effects of spreading withdrawals over several years maybe to minimize taxes, i.e. just enough each year to remain in the 15% bracket.

Had the exact same thing last year -- came in for consultation in the summer -- tried to talk her out of it and gave several scenarios which would minimize the taxes. Suspect she went ahead and did it anyway. I could tell she really wanted to get rid of that mortgage payment at all costs, no matter what. She retired in June so also had a half year's salary to factor in 2011.