401 (K) QDRO DISTRIBUTION NO 10% PENALTY
Often times during a divorce, one of the parties will receive a Qualified Domestic Relations Order in the other parties 401(k). Often times this is a great opportunity to obtain funds to purchase a new home or payoff marital debt. Internal Revenue Code Section 414(t)(2)(C) exempts from the 10% “early distribution” tax “payment to alternate payees pursuant to Qualified Domestic Relations Order”(QDRO). The 10% tax is generally imposed on distributions to recipients under 59 and one half years of age.
As a result, rather than paying the underlying tax plus a 10% penalty fee. You only end up paying the underlying income tax. It is important to note that this only applies to 401(k) distributions and does not apply to IRA distributions.
We can answer all your questions about divorce. Call us for a free consultation and we can answer your questions with answers that are specific to your situation. FREE CONSULTATION 616-459-6636.
Grand Rapids Divorce Attorney
161 Ottawa NW Suite 201
Grand Rapids MI 49503
616-459-6636 or [email protected]
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