Not all retirement plans are the same. In a Tax Court Case This week Lily Hilda Soltani-Amadi and Bahman Justin Amadi v. Commissioner, T.C. Summary Opinion 2019-19 (Aug. 8, 2019) just some of the differences were made clear on an early withdrawal for the down payment of the purchase of a new home. The Money was withdrawn from a 401(K).
Now you can borrow against a 401(K) and the payback differs from a Home purchase and everything else and the loan is not taxable (if paid back). If you withdraw the money you have to pay the income tax, yes.
The Dispute here was the 10% early withdrawal penalty (§72(t) 10% penalty). There are some exceptions to the 10% penalty. There is, for example, an exception - for a qualified first-time home puchase up to $10,000 (a lifetime limit) can be withdrawn without penalty BUT NOT from a 401k. This exception applies to “qualified retirement plans” and a 401K is NOT qualified.
In Future Blogs I will talk more about retirement plans, 401(k)s, and IRAs.
Call us at First Call Tax Advocates before, because sometimes after is to late.
You need to call us now and call us First! Call us at First Tax Tax Advocates 718-400-9250
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