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Posted by Paul Thomas, CPA on June 20, 2006, 1:53 am
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> I left my company and defaulted on a 401k loan. The amount
> owed was about 12000 dollars. Do I have to pay the 10
> percent fee and fed taxes now, or within a quarter, or can I
> wait until I file next year.
Either of the above will do. But to save on penalties you
might want to be sure that you pay enough in to meet one of
the safe harbor rules. Most likely paying in about 110% of
last years taxes (Line 63 of 2005 Form 1040) will cover it.
Also, if you have teh money now, set the remainder of your
expected tax aside in a short term (6 month?) CD so you are
assured to have it next April. The balance can be paid with
the return without penalty.
You will want to be sure to over withhold next year (2007)
so that you don't get any penalty for underpayment.
> If I do wait until I file next year, will there be an additional penalty
> for not paying enough taxes during the year.
Possibly, if you don't meet one of the safe harbor rules,
you could be penalized.
> I was once told that, in anticipation of substantial
> dividends, I should have my employer take an additional sum
> for the feds, as there would be a penalty. Is that true?
Yup. You can have extra withheld, but paying enough in now
and banking the rest will benefit you the most.
--
Paul Thomas, CPA
paulthomascpapc@bellsouth.net
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