QUESTION DETAIL
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For refinancing purposes, the lender is demanding a presence of a certain amount of liquid assets in my checking account. The question is will there be a tax liability if I withdraw money out of my 401K and it is transferred to my checking account for this purpose and shortly after returned.
ANSWER
Expert Charles Markham's Answer:
I am a mortgage broker as well as an accountant. For mortgage purposes, you have to show a certain amount of "reserves". The money IN the 401K account counts as "reserves". You do NOT have to move the money to your checking account. This IS a taxable event. (Although you can put the money back within 60 days).
Go back and clarify with the mortgage company if the "reserves' can simply be money in a 401K or IRA account.
Best Regards,
Charles Markham