Gainesville, FL asked in Tax Law for Florida

Q: Will I have to pay additional tax and do I have to pay the 20% tax now on a beneficiary 401k

My dad died at 78 and he had and I was the benificery of his 401K but didnt find out till 5 years later. I am on SSI and I need the money to pay my property tax and pay for my wooden fence that was damage due to Hurricane Irma. The money in the 401K was a little over 5000.00 it was left into his job but put in my name listed as a beneficiary 401k. The place wants to charge me 10% to take it out and another 10% on top which total 20%. I do not work and I get SSI 750.00 and nothing else. Do I have to pay the 20% and will I have to pay more taxes during income tax file time

Related Topics:
1 Lawyer Answer
Eric Steven Day
Eric Steven Day
Answered
  • Tax Law Lawyer
  • Henderson, NV

A: When you withdraw funds from an inherited IRA, the money is subject to income tax to the beneficiary that withdraws the IRA. However, you should not be required to pay the 10% penalty for the early withdrawal of these funds. Therefore, the first 10% withholding would be a good idea in case you owe taxes after deductions on the distribution, but the additional 10% which would be to cover the penalty if there was one is not necessary. I would have them withhold the first 10% even though you may owe no tax based on your income levels.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.