Tax on pension cash out.?

If you want a reasonable estimate, take your last years income tax return, plug in the potential payout and re-figure what your regular income tax would have been then add $11,000 plus whatever your state charges for an early withdrawal.

After you get up off the floor, the word you will be groping for is rollover.

Dear Whatever: I like the answer of about half of it. But you did not say if you also made any of the contributions to this plan after tax. If so they would come back to you tax and penalty free. You also have the choice of rolling over this money to a self directed or brokerage directed IRA. At that point you could tap the funds for a portion of this account. A much wiser choice unless you absolutely need all this money. If you decide to take the bundle ($110K) you should also send in or have with held some Federal tax money to avoid the year end penalty for not paying on time (quarterly).

If this money is a 410K and your old company will hold the money for a while, you could possibly borrow against this money. Not a bad plan as this would eliminate taxes and penalties.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent.

If they withhold 40% overall and that includes state and local taxes, don't expect a lot of it back. If the 40% on the salary lump sum includes the ss and medicare withholding, 40% total will be fairly close but maybe not enough. You can save some tax by rolling the pension amount over to a traditional IRA. If you put it into a Roth, you'd pay the income tax but not the penalty. If you just take it out, you'd pay income tax AND a penalty.

in other words, you have to do something with this 401K? or is this some other type of pension?

if you are unable to roll it over into another tax deferred product, this will add to your overall gross which you say now is $200K

that would put you over $300K and considerably higher tax bracket

you mention penalties, so this sounds like it could be rolled over, that is the way to avoid being taxed on it

otherwise the only penalties would be if you did not file your estimated(1040ES) on the additional income tax you anticipate this will cause

Assume 28%-33% Federal tax plus a 10% penalty if you are not over 59 1/2 years old plus state taxes at your state's highest rate (if applicable).

Worst Case? Say goodbye to half of it.

No one can tell you.

Any money you do not roll over to an IRA will be taxed at your marginal rate (plus the 10% penalty). If you add $110,000 to your income for 2010, what bracket will you be in?

Could be as much as close to half if you live in a high-tax state. You'd be ahead to put some or all of it into a rollover IRA