401K withdrawal

[Pacun]

Client was 59 years old on March 17, 2014 and he took out 401k moneys on Sept 4 and Sept 14, 2014.

 

I just want to double check. He has to pay penalty, correct?

[Elrod]

Pacun...........See            http://www.irs.gov/pub/irs-pdf/p5036.pdf

[kcjenkins]

He was not 59 1/2 until Sept 18,   How could he make such a dumb mistake?

[Gail in Virginia]

Was he separated from service?

[Pacun]

No. He didn't separate from service.

 

Yes, he made a mistake.

[Pacun]

Pacun...........See            http://www.irs.gov/pub/irs-pdf/p5036.pdf

 

I love your link... you are very helpful but I have read that about 5 times and I just wanted to double check it.

[kcjenkins]

I love your link... you are very helpful but I have read that about 5 times and I just wanted to double check it.

Understandable, because such a huge mistake is sure to be hard for him to swallow, so you are smart to get your cites organized before you talk to him.  No doubt he was told by someone he trusted that he could do it without penalty.   A good time to gently remind him that he should check with you before making any major financial moves.   

[Pacun]

I think this happens to all of us. When a TP makes a stupid mistake (in this case he had to wait less than 15 days), you hope you misread something and you wish that someone will tell you that you are wrong and that's why you post the question. Ironically this person didn't need the money until late November. I told him he had to pay the penalty.

[kcjenkins]

"I told him he had to pay the penalty."   Hope you pointed out that was the cost of NOT asking you first?