AboutMike Wellman Expertise I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size. I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All others will be referred to the question pool.
Experience Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.
Publications New York Times, Wall Street Journal, You Money Magazine
Education/Credentials BBA, Baylor University.
Awards and Honors My website http://www.IRSOS.com won the Knowledgeweb award for educational excellence for content.
Expert: Mike Wellman Date: 12/5/2007 Subject: Tax Planning
Question Mike, I recently made an early withdrawl of about $30K from my 401K to start a home business and I didn't have Fidelity withold any taxes from it when it was disbursed. I figure I may owe as much as a third of it to the irs in April. Is this a correct assumption and also, how easy is it to set up an installment plan right off the bat in case I don't have it all in cash? Thanks for your time.
Emilio
Answer First of all, the withdrawal will be subject to an immediate penalty of about $3,000. The tax depends on your marginal tax rate which could be 25% or more. So you should plan on 35%.
Installment agreements are not that hard to get unless you accrue new tax every year or constantly default on them. If it is a first time thing, you can get five years to pay it off, but I suggest you pay it off as soon as possible to save on interest and penalty.
