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How to Cancel My 401(k) Due to Divorce

By Business & Finance Last updated Friday, May/31/2024

1). Acquire a qualified domestic relations order from a qualified state agency or court. This order is usually drawn up as part of the divorce decree. The order lists the personal information of both spouses and the percentage or amount to be distributed to each spouse.
2). Contact your 401(k) plan's administrator and request a distribution to your ex in the amount specified by the qualified domestic relations order. The rest of the money will be distributed to you in the account of your choosing.
3). Complete IRS form 5329 to state the reason for the early withdrawal and closing of the 401(k) account. This form prevents the IRS from charging you a 10 percent early withdrawal fee.
4). Enter the amount of the withdrawal on IRS form 1040 as an annuity withdrawal and taxable pension distribution. This amount must be reported to the IRS as taxable income. However, include form 5329 along with the 1040 to prevent this amount from being taxed.

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