How much is the 401K penalty? Learn about the penalties for 401K's. 10%. So if someone is 40 years old and they divorce and don't have any money, they pull money out of that 401K. At the end of the year,...
10%. So if someone is 40 years old and they divorce and don't have any money, they pull money out of that 401K. At the end of the year, they are going to get a rude awakening as to how much money they owe, and in fact, this happened just yesterday, I talked to a lady and she separated from her husband last year and she lived off her 401K. I didn't ask her how much money she spent but she owes the IRS $41,000 and now she is back with her husband. Now they have created this huge tax bill and they can't pay it. These are things that get people in trouble. First of all, they are ignorant of the facts. The reason she contacted us is because she wanted to know if he was responsible for that too. Yes he is, they filed a joint tax return. So she is not working anymore, but the husband is definitely and the IRS is going to go after him for the money. A lot of times, these kinds of situations cause divorce. They really do, because you can see that will put a huge pressure on the marriage. That's why we are in business; to help people who've gotten themselves into those kinds of situations. Well, I think most of the time it's innocent. I don't think most of the people are tax protesters.
There are organizations [of tax protesters], one of them is the Patriots and they say the IRS is illegal and it's unconstitutional and that you don't have to pay your taxes. I have a doctor client that got involved with one of those organizations five years ago and he bought into their philosophy. These guys will coach you to not pay taxes. [They say] "Just don't pay them, you really don't owe them, it's unconstitutional." Now when the IRS hears those words, it just lights a fire and they are going to go after that guy like you can't believe. I don't blame them because it has been proven over and over in the courts that you are going to have to pay your taxes. There are organizations that 99.9% of the people never even heard about, but they are out there among the people and they are called tax protesters. 4-5 years later, they end up billing $50,000 and then they scream for help because they have a problem. I have had clients bring their head guy with them to my office to tell me this guy didn't have to pay taxes. I just handle it very simply. I will say "sir you are welcome to be here to advise your client, but don't tell me whether this person has to pay tax or not because that's not the reason we are here. We are here to help this person resolve their tax problem and look at their best options to do that" That's the only way you can avoid an argument, because if you start trying to prove to them that the IRS is legal and then he's got all his case and point to document the fact. That's what they do with the people; they just bombard them with all these "facts," but the bottom line is that's not what happens.
