Need some financial advice RE situation with in-laws

[Col. Flagg]

I put this here in the principles of freedom section since the situation here is definitely something that helps take away ones freedom (the IRS and 401k laws).

My in-laws found out a few days ago after having their taxes done that they 'owe' the criminal IRS $4,000 owing to some kind of snafu with my Father-in-Law's social security. My wife and I have been trying to figure out a way to help them out and give them the money they need since they don't know where they are going to come up with the funds. Right now, we're trying to work it out to divide the $4,000 3 ways so that my brother and sister-in-law pitch in as well, but that's pending their tax returns. One option we are considering is withdrawing the $4,000 from my wife's 401k, but of course, that would come with a 35% penalty (25% penalty, 10% tax), meaning we'd have to withdrawl $5,400 to get the $4,000. Is it possible for my wife to withdraw just the $5,400 or would she have to withdraw it all? I guess we're just looking for some sound financial advice that is do-able for us. Any suggestions would be great. Thanks!

[Original_Intent]

Most 401(k)'s have provisions for loans of up to 50% of the balance. The positive side is that the interest all goes to yourself (the interest you pay goes into the 401(k) fund) I also do not think the penalty is 25%.

[Watchdog]

I believe the penalty is 10% and the money you pull out is added to your other income for the year and taxed at your marginal rate. Good luck with that Bro. and keep up the good work with your postings. I don't have to watch the news anymore. I'm much better informed by just reading what you, the Mummy and other watchdogs post. Thanks again Colonel!

[durangout]

Godspeed.

[dennis]

In the early 1990's I had a tax bill over 60,000.00. I wish now in retrospect, I had taken the money and moved to Argentina. And that is the best advice I would give any and every one else. Get out of dodge

[ChelC]

OI is right. We did a 401k loan to help pay medical bills a few years back. Interest goes to yourself (well... Depends on how old you are, IMO... I do not expect that money to be there by the time my husband retires).

It's not a bad way to do it, if you have no other options.

[shadow]

Can't they make payments to the IRS??

[Jason]

Can't they make payments to the IRS??

I think the interest rate is 17%.....

[shadow]

Can't they make payments to the IRS??

I think the interest rate is 17%.....

"I owe my soul to the company store!"

[Jason]

Can't they make payments to the IRS??

I think the interest rate is 17%.....

"I owe my soul to the company store!"

WASHINGTON — The Internal Revenue Service today announced that interest rates for the calendar quarter beginning April 1, 2011, will increase by one percentage point. The rates will be:

* four (4) percent for overpayments (three (3) percent in the case of a corporation);
* four (4) percent for underpayments;
* six (6) percent for large corporate underpayments; and
* one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.

http://www.irs.gov/newsroom/article/0,, ... 27,00.html" onclick="window.open(this.href);return false;
http://www.irs.gov/pub/irs-drop/rr-11-05.pdf" onclick="window.open(this.href);return false;

Federal Short-term rate
http://evans-legal.com/dan/afr.html" onclick="window.open(this.href);return false;

....so looks like about 17% give or take

[Col. Flagg]

Just wanted to say thanks to all of you who have responded here - I appreciate the replies and am weighing our options accordingly.