The Internal Revenue Service reported that in 2011 it collected $5.7 billion in penatlies as a result of early withdrawals from 401K plans. In that year, Americans took roughly $57 billion from their 401K plans as early deductions.
Normally, the distribution from a 401K plan as a result from a dissolution of marriage can be managed so that there are no penalties or taxes as a result. However, early withdrawals from a retirement plan create another set of problems which needs to be addressed in a dissolution of marriage. Depending on when the withdrawal occurs, such an early withdrawal can create a joint tax liability.
