Taxes on 401K Withdrawals

My daughter lost her job and is planning to use her 401K to cover expenses while she looks for work.  I am thinking she is going to have to pay a large sum in taxes on this 401K money, but she does not agree with me and says the money was withheld when she got the proceeds.  Is this a common practice, or is it possible that what was withheld is actually a penalty fee, and she will still owe taxes? 

401K is not a good way to get rid of such problems I think you should advice her to stop from doing this.

There are other many ways to cope with htis problem such as sui the company.

Using a 401K to pay off debt often causes many more debt problems down the road.  By taking out of the  401K early she will have to pay taxes on that and it will likely be a nice chunk of change.  So many people go into tax debt with the IRS for this sole reason.  Caution really needs to be taken.  If she does decide to do it, it is important that she realizes that she will need to set aside money to pay the taxes at the end of the year.

even if the 401k people took the normal 20% tax out of her proceeds which they usually do unless she marked not to, there will definately be a 10% penalty on the full amount withdrawn when she files her taxes there is a separate form or line for this but if she doesn't show it they will bill her anyway and add more interest and penalty so she needs to set aside 10% or have enough of a refund coming to cover it when tax time comes.

 

I wonder if she tried to apply for unemployment benefits first before she took out a loan from her 401(k)...and money was withheld from her probably because she withdrew from her 401(k) before the retirement age (she was hit by both the tax and penalty).

There are tons of online list of the rules for 401k's. If you want an easy-to-read and comprehensive list check out this link about 401k withdrawal rules.
Hope to help.