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A viewer owes about $5,000 in back taxes from 2016 through 2019. Should they use their 401(k) to pay it off or set up an IRS payment plan?

In this video, I explain the difference between a 401(k) loan and a cash distribution, the potential income tax and early-distribution tax, and why an IRS installment agreement may be another option. I also discuss checking the collection statute expiration date (CSED) on older tax debt before deciding what to do.

CHAPTERS
0:00 401(k) or IRS payment plan?
0:20 401(k) loans and plan rules
0:41 Cash withdrawals and potential tax costs
1:43 IRS installment agreements
1:55 Check the IRS collection deadline
2:42 Before paying older tax debt
3:08 Get help with tax debt

Important: 401(k) withdrawal and loan availability depend on your plan and circumstances. Exceptions to the 10% early-distribution tax may apply. Guaranteed installment agreements have additional eligibility requirements. The IRS collection period generally runs from the assessment date, and certain events can suspend or extend it. A tax year alone does not tell you when a debt expires.

IRS RESOURCES
401(k) distribution rules: https://www.irs.gov/retirement-plans/...
Retirement plan loans: https://www.irs.gov/retirement-plans/...
Payment options and guaranteed installment agreements: https://www.irs.gov/taxtopics/tc202
IRS collection deadlines: https://www.irs.gov/filing/time-irs-c...

For general educational purposes only. Your options depend on your circumstances.

#401k #TaxDebt #IRSPaymentPlan