Question for the Money Doctors
Question submitted on Aug 12, 2013.
QuestionI cashed out my 401 IRA at 46,300. Thinking my income tax would not be intolerable but if it is,is their a way of spreading it out for several years to pay it?
Although a 401(k) is a different investment than an IRA, the general rules for taxing outright distributions are similar. Presuming that you cashed out your traditional (not ROTH) IRA, please note that there is generally a 60 day rollover period during which you can change your mind and reinvest some or all of the money back into a traditional IRA, and not pay the taxes on the amount reinvested/rolled over. Otherwise, distributions from IRAs are taxable to the extent they exceed your basis in the year of receipt. For state income tax purposes, the rules vary by state.  Please check with a CPA/PFS (visit www.findacpapfs.org) professional in your home state to help you with your available options.
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