My position was eliminated, and I wasn't allowed to keep my 401k balance in their plan. I withdrew it and had them withhold taxes and penalties before I got my balance. If I don't roll it over into a new plan, I just need to know if I'm going to have to dish anything out next year at tax time..
Hi Ryan, Sorry to hear about your job loss. Your answer simply depends on what your tax bracket is. Your employer should have withheld 20% for federal and 2-8% for state taxes (depending on your state). There is also a 10% penalty that is due if you cash out before age 59 1/2. So, essentially, if you fall in a very low tax bracket for the year (under 10%), your are all paid up and may even get a refund. However, if you fall in a higher tax bracket than 10%, there will be more tax due when you file. Obviously, these taxes and penalties are the reason we typically discourage people from cashing out early. Good luck!