I cashout my 401k that had $25k and I’m in the 15 percent and made $16k and switched jobs this year in August and I make $2760 a month?
Before taxes. I’m aware of the ten percent penalty before 59. I had the employer withhold 8k for taxes. I’m sure it’ll bump me into the 25 percent bracket. How do I figure the amount I owe come tax year? “Please don’t tell why would I do that or that was dumb”
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let's see, you have a $25K distribution of a 401(K), already made $16K income and plan probably another $13800 by year's end, that puts you at $54800 income, less $4050 for your personal exemption, $6400 standard deduction if you are single which brings you to taxable income of $44350
you have $2500 early penalty and and probably close to $10k income tax on the earnings
Fill out an income tax return on the 2016 forms for a reasonable estimate. The 2017 forms aren't out yet
Please clarify your income. Did you earn $16k by the time you changed jobs? Or did you estimate that you would have earned $16k at the old job if you stayed at that job all year? It makes a big difference.
Without a clearer picture, I can say that you will be in the 25% bracket for some of the $25k, but not all of it.
Edit: Thanks for the clarification. You are not earning substantially more at the new job but it is more. I'll assume you earned the $16k in 7 months. You'll earn close to $14k for the rest of the year, so you'll earn about $33k, as opposed to what the new job would pay for the whole year, about $33k.
So you earn $30k and add $25k to that. Let'd add $350 to that just make the math illustration more simple. Your gross income is $55,350. You get the standard deduction of $6,300 and the personal exemption of $4,050, for $10,350 right off the top. You pay tax on $45,000 if you have no tax credits.
You are in the 15% bracket on the first $37,950 = $5,226.25
You are in the 25% bracket on the next $7,050 = $1,762.50
Total tax = $6,989
Penalty = $2,500
You are going to owe about $8,500.
If you had them take $8,000 from the $25k, it's probably a little too much and you'll get some of that back next year when you file. You can get an idea by looking at your final pay stub for the old job and your latest pay stub from the new job and add up the federal withholding for the year so far. Both will probably be in the 10% - 15% range of what you earned. You might end up overpaying for the year by $3k or so.
You have to add the whole 25k to your earned in one for the year plus pay the 10 percent penalty
Your tax rate will be based on your wages + $25,000 plus $2,500. You can roll the $25,000 into a traditional IRA and defer the tax
How will you find out the amount you owe at tax time?
You complete your tax return. It will include your wages and your withdrawal. It will include your taxes withheld as part of your job and this transaction. Then it will list an amount you owe or are due a refund.
If you want to estimate it now, complete a mock 2016 tax return.
First, you add the amount you made working, the amount you took from the 401K, and the amount of any other taxable income you had.
Next, you calculate the income tax on the total (you cannot figure it for each thing individually).
Finally, you subtract what the employer withheld for income tax (both the 8K withheld from the 401K distribution and what was withheld from your paychecks for income tax). You owe whatever is left.
Thank you. My apologies, I’m filing single