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Question for the Money Doctors

Question submitted on Aug 12, 2013.

Question

I 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?

Answer

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.&nbsp 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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