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Calculate Taxes Owed on Hardship Withdrawals
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#Finalize the amount of your withdrawal. Depending on your plan, you may be limited on how much you can withdraw. While IRAs will allow you to take out as much as you want, employer-supported plans like 401(k)s will likely limit your withdrawal to money that you have contributed to the account. This means that matched funds supplied by the employer, earned interest, and previous withdrawals will typically not be available to be withdrawn. However, individuals plans may allow for some or all of these amounts to be withdrawn, depending on your circumstances.<ref>http://ift.tt/2hTez6Q Taxes Owed on Hardship Withdrawals Step 5.jpg|center]]
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#Finalize the amount of your withdrawal. Depending on your plan, you may be limited on how much you can withdraw. While IRAs will allow you to take out as much as you want, employer-supported plans like 401(k)s will likely limit your withdrawal to money that you have contributed to the account. This means that matched funds supplied by the employer, earned interest, and previous withdrawals will typically not be available to be withdrawn. However, individuals plans may allow for some or all of these amounts to be withdrawn, depending on your circumstances.<ref>http://ift.tt/2hTez6Q Taxes Owed on Hardship Withdrawals Step 5.jpg|center]]
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#*Fully vested employer contributions may also be available for withdrawal under some plans.<ref>http://ift.tt/2hOhGQ7;
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#*Fully vested employer contributions may also be available for withdrawal under some plans.<ref>http://ift.tt/2hOhGQ7;
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#Add in the early withdrawal penalty, if applicable. Calculate and add in your early withdrawal penalty if your hardship withdrawal is not exempt from it. This amount is added together with your income tax to determine your total taxes on the withdrawal.<ref>http://ift.tt/2hTeUGi; For example, if you incurred a 10 percent penalty for your $25,000 hardship withdrawal, you will owe $2,500 in penalties. With just federal tax and penalties, you lose $8,750 from your original withdrawal of $25,000.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 6.jpg|center]]
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#Add in the early withdrawal penalty, if applicable. Calculate and add in your early withdrawal penalty if your hardship withdrawal is not exempt from it. This amount is added together with your income tax to determine your total taxes on the withdrawal.<ref>http://ift.tt/2hTeUGi; For example, if you incurred a 10 percent penalty for your $25,000 hardship withdrawal, you will owe $2,500 in penalties. With just federal tax and penalties, you lose $8,750 from your original withdrawal of $25,000.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 6 Version 2.jpg|center]]
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#*This leaves you with $16,250 to use for expenses or other hardship purposes.
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#*This leaves you with $16,250 to use for expenses or other hardship purposes.
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#Determine your current income tax bracket. You may be able to determine this by consulting your tax return from the previous year or by checking with the IRS. The IRS website has tax schedules that should give you this information. You need to know your gross income, filing status, and deduction amounts in order to use the tax schedule tables.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 7.jpg|center]]
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#Determine your current income tax bracket. You may be able to determine this by consulting your tax return from the previous year or by checking with the IRS. The IRS website has tax schedules that should give you this information. You need to know your gross income, filing status, and deduction amounts in order to use the tax schedule tables.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 7.jpg|center]]
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#*Be sure to use the most recent tax bracket information when determining your tax rate.<ref>http://ift.tt/2hOieFM;
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#*Be sure to use the most recent tax bracket information when determining your tax rate.<ref>http://ift.tt/2hOieFM;
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#*Be careful when figuring the taxes for your hardship withdrawal. If you're on the edge of a tax bracket, the hardship withdrawal income may push you into the next bracket, which will leave you owing more taxes than you originally budgeted.
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#*Be careful when figuring the taxes for your hardship withdrawal. If you're on the edge of a tax bracket, the hardship withdrawal income may push you into the next bracket, which will leave you owing more taxes than you originally budgeted.
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#Calculate taxes owed. The withdrawal will usually be treated as income and taxed accordingly. Calculate your tax liability by multiplying your marginal tax rate by the amount of the withdrawal. For example, if you are in the 25 percent tax bracket, the federal tax on a $25,000 withdrawal is $6,250.<ref>http://ift.tt/2hTi6Su Taxes Owed on Hardship Withdrawals Step 8.jpg|center]]
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#Calculate taxes owed. The withdrawal will usually be treated as income and taxed accordingly. Calculate your tax liability by multiplying your marginal tax rate by the amount of the withdrawal. For example, if you are in the 25 percent tax bracket, the federal tax on a $25,000 withdrawal is $6,250.<ref>http://ift.tt/2hTi6Su Taxes Owed on Hardship Withdrawals Step 8 Version 2.jpg|center]]
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#Pay withheld taxes. Make sure to factor in taxes that have been withheld. Taxes may be withheld by either by payroll deduction or making a quarterly estimated payment, for example. This helps you to avoid surprises at tax time.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 9.jpg|center]]
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#Pay withheld taxes. Make sure to factor in taxes that have been withheld. Taxes may be withheld by either by payroll deduction or making a quarterly estimated payment, for example. This helps you to avoid surprises at tax time.[[Image:Calculate Taxes Owed on Hardship Withdrawals Step 9.jpg|center]]
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