Now what do I do?

[revek]

What is the name of your state (only U.S. law)? Missouri

My husband injured himself Dec 23 2013 or thereabouts, he was put on short term disability for six months. We did not apply for workman's comp as we could not attest that the injury happened at work. We decided to get a loan from our 401k to pay off all credit and medical bills before he applied for long term disability, total of 25k (it was the only solution at the time). Just after we received that money, we applied for long term disability and then were notified that he was fired, because the company could not keep him on the books any longer (gee they couldn't tell us this before we withdrew from the 401k? it's not like they didn't know our plans, we were in constant contact with the head of HR). The short term disability was approximately 3600 in total for the year, plus the 25000 401k loan for a total of 28600 for the entire year. We could not pay back the loan as there was no other income. (He has since applied for SSD and I have found work as of Jan this year). Husband 56, myself 52, no dependents. What kind of tax bill am I looking at and is there any sort of deduction or exemption that could help reduce the amount? Thank you for your suggestions.

 

[LdiJ]

What is the name of your state (only U.S. law)? Missouri

My husband injured himself Dec 23 2013 or thereabouts, he was put on short term disability for six months. We did not apply for workman's comp as we could not attest that the injury happened at work. We decided to get a loan from our 401k to pay off all credit and medical bills before he applied for long term disability, total of 25k (it was the only solution at the time). Just after we received that money, we applied for long term disability and then were notified that he was fired, because the company could not keep him on the books any longer (gee they couldn't tell us this before we withdrew from the 401k? it's not like they didn't know our plans, we were in constant contact with the head of HR). The short term disability was approximately 3600 in total for the year, plus the 25000 401k loan for a total of 28600 for the entire year. We could not pay back the loan as there was no other income. (He has since applied for SSD and I have found work as of Jan this year). Husband 56, myself 52, no dependents. What kind of tax bill am I looking at and is there any sort of deduction or exemption that could help reduce the amount? Thank you for your suggestions.

Your husband is over 55 and separated from service so he should not be subject to any penalty on the 401k. 28600 minus your standard deduction and your personal exemptions should leave you about 8300.00 in taxable income or about 830.00 in tax. If there was any withholding that will help you.

Now, those figures are based on no other income, from any sources...and no other deductions or credits. Those figures also assume that you had health insurance all year, if you were without for any part of the year, you could be subject to a couple of hundred in penalties for that.

 

[revek]

Thank you, that eases my mind considerably!

 

[LdiJ]

Thank you, that eases my mind considerably!

If you can find a way to have a professional do your taxes I would recommend it. Its a bit tricky to make sure that you get the 10% penalty exclusion and I am not very comfortable with how online software handles it. Its all Q and A based and if you answer a question wrong, the penalty might not get excluded properly. Just make sure that you tell the professional that your husband is over 55 and was separated from service.