Shauna received a $100,000 distribution from her 401(k)account this year. Assuming Shauna's marginal tax rate is 25 percent, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59 ^th birthday and she has not yet retired?

Question

Quizplus · Accepted Answer

Shauna will owe $25,000 in taxes because distributions are taxed as ordinary income at her marginal tax rate of 25 percent. Additionally, because she is under the age of 59½ and has not yet retired, she will also owe a 10% early withdrawal penalty on the distribution, which amounts to $10,000. Therefore, the total amount of tax and penalty she will be required to pay is $35,000.

Shauna Received a $100,000 Distribution from Her 401(k)account This Year