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  1. #1
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    Question about taxes and unemployment.

    Okay so, I actually ended up getting laid off at the end of December like we thought. There was a lot of back and forth, but we're pursuing to get our jobs back by legal action. There was a case very similar to ours 15 years ago and they got their jobs back, so it established a legal precedent.

    Anyway, without boring any of you with the details, I have a question or two. Now I fully intend to ask an accountant when I get my taxes done in month, but figure it can't hurt asking here.

    Okay, so I've filed for unemployment this week. (I'm in NY) Can't get my first actual payment til next week. I have some unpaid credit bills I would like to get rid of. I have the sources to get rid of this by dipping into my 457k (think similar to 401k) Having the debt off my shoulders would be a massive relief, and I could just bank all the unemployment, without having any bills or anything aside from minor things. I know some people would say don't touch it because it's retirement money, but clearing this up would do so much more for me.

    So here's the question. Do I report to unemployment this (roughly) $5000 lump sum to NYS Unemp? I saw on the NYS unemp. website you need to report a lump sum of pension, but this isn't pension. It was my savings that I put aside. I basically don't wanted to be fucked at the end of the year if NYS looks at my income and says "Hey you didn't report 5k, now you have to pay us back!"

    Don't know if anyones been in a similar or anything, and as I said I'll ask an accountant, but looking for something temporary til then. I guess I could always call NYS as well, but getting them on the phone is like pulling teeth.

  2. #2

    If taking out of your 457k is anything like taking out of a 401k you'll get double taxed. 10% for taking it out and then another 10% when taxes roll around. Unless your interest rate exceeds that(You'd probably have to be unemployed for at least a year for interest to get up to that amount) then it's not worth it.

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    Yes, you'll have to report it, if you don't they won't likely catch it right away but if they're anything like IL within a year or two they will and bill you for it. I over-extended my benefits by $1,800~ awhile back similarly and they got me on it, as well as everyone I've ever known who has done something similar. Not sure how NY is but IL is at least pretty cool about it, they don't garnish your wages or anything, you just have to pay it back before you can collect benefits the next time you are unemployed, and if you have to file again your benefits are applied directly to your back-owed amount.

    I'd really, strongly recommend not fucking with your retirement money though. Call the creditors, let them know you were laid off and are now unemployed and will be collecting benefits, and work out some sort of short-term reduced payment plan that is manageable on what you'll be getting for benefits.

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    Well right off the top, they take 20% off. So it goes from $6200 to $5000, then when taxes roll around, you need to report it as income, so you get hit again. I always get money back, so I could deal with getting little to nothing back. The point here is I'd be getting rid of $5000 in debt at 25% interest instead of making minimum (or next to) payments, thus saving a lot of money.

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    The 25% is on the debt itself? Is it like a payday advance loan or some shit? If that's the case then that's probably different, that shit can bury you quickly, if it's just like a plain credit card with a standard rate I'd stick to the minimums until you're back on your feet, as you're also losing out on future interest by killing the principle of your retirement money.

  6. #6
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    Yeah, the APR is 25% I've tried to work something out with them as I've been with them for 12 years and have never had a late payment, but they just won't lower it. So you can see why I might consider it. I still have money vested in the state, and I don't intend on touching that, and will probably roll it into an IRA.

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    Ouch, yeah, you aren't going to earn 25% on your retirement fund so it's probably best to get out from under that, though I'd strongly recommend siphoning off income to replenish that fund ASAP, not something you want to be too complacent about building back up.

  8. #8

    Quote Originally Posted by Odesseiron View Post
    Yeah, the APR is 25% I've tried to work something out with them as I've been with them for 12 years and have never had a late payment, but they just won't lower it. So you can see why I might consider it. I still have money vested in the state, and I don't intend on touching that, and will probably roll it into an IRA.
    Don't touch your 401k for the reasons stated above. You are nowhere close to being bankrupted. 5k is not that much money if you pick up side jobs and just continue to widdle down the amount quicker. Don't ever dip into your 401k or retirement unless you are going into bankruptcy. If you have stocks outside of the 401k dip into those to give yourself some breathing room.

    How much is your minimum payment right now?

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    It's like $175. I mean I can easily afford it on UE, being $350 a week after taxes. It's just been hanging over my head for so fucking long I want to be rid of it. You must understand, at one point 2 years ago, my debt in credit cards was almost $25k. Since then, almost every dime that hasn't gone to rent or whatever other bills has gone to paying this debt off. With that solution (possibly) in sight, I want to get rid of it. I'm not saying I WILL do it, as I'll probably leave the money there, I'm just looking at options.

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    Is there any way you can apply for a new credit card (lie about your current income if necessary) that has 0% interest on balance transfers for 9 months or whatever? It's not clear if you're talking about CC debt but if you are (or if you can pay this debt with a credit card) you might wanna go that route til you get back on your feet.

    Edit: yeah dude if it's CC debt just roll it onto a promo balance transfer to stop the obscene interest and then start chipping away at it.

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    Quote Originally Posted by archibaldcrane View Post
    Is there any way you can apply for a new credit card (lie about your current income if necessary) that has 0% interest on balance transfers for 9 months or whatever? It's not clear if you're talking about CC debt but if you are (or if you can pay this debt with a credit card) you might wanna go that route til you get back on your feet.
    Tried that not long ago. With as good as my credit is (my fico score is 750) all I got was a credit card with a $600 balance transfer at 0% with the remainder staying on the original card, kinda pointless.

  12. #12

    Quote Originally Posted by Odesseiron View Post
    It's like $175. I mean I can easily afford it on UE, being $350 a week after taxes. It's just been hanging over my head for so fucking long I want to be rid of it. You must understand, at one point 2 years ago, my debt in credit cards was almost $25k. Since then, almost every dime that hasn't gone to rent or whatever other bills has gone to paying this debt off. With that solution (possibly) in sight, I want to get rid of it. I'm not saying I WILL do it, as I'll probably leave the money there, I'm just looking at options.
    Very nice so you have paid off 10k a year? That is sweet! If I were in your shoes I would just slowly work at it man, don't dip into your retirement.

    Quick questions, how much is your expenses a month? Rent/utilities/etc., Just trying to see how big of a shovel you will have to get out of this hole.

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    lol I think you took more off your debt last year than I made in income, definitely wouldn't be sour at that

  14. #14
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    Quote Originally Posted by Serif View Post
    Very nice so you have paid off 10k a year? That is sweet! If I were in your shoes I would just slowly work at it man, don't dip into your retirement.

    Quick questions, how much is your expenses a month? Rent/utilities/etc., Just trying to see how big of a shovel you will have to get out of this hole.
    Well I'd say more than 10k, taking APR into account. Monthly expenses I think off the top of my head are about $400 for rent/cell phone. Unfortunately (fortunately?) I live at home, or else I'd be really fucked. I pay $300-400 a month depending on bills. Usually though it's $300. Then tack on the cell phone, that's my only recurring charge. A few bucks for gas, as I don't too far. All in all let's say $400-$450. That leaves me with roughly $1000 (give or take) with UE Ins.

  15. #15

    Quote Originally Posted by Odesseiron View Post
    Well I'd say more than 10k, taking APR into account. Monthly expenses I think off the top of my head are about $400 for rent/cell phone. Unfortunately (fortunately?) I live at home, or else I'd be really fucked. I pay $300-400 a month depending on bills. Usually though it's $300. Then tack on the cell phone, that's my only recurring charge. A few bucks for gas, as I don't too far. All in all let's say $400-$450. That leaves me with roughly $1000 (give or take) with UE Ins.
    If you live at home, I take it you get home cooked meals?

    So lets round down to 200 after your minimum payment. You can easily live off of 100 bucks a week, hell if you want to get crazy since you are living at home and go 50 bucks. That leaves anywhere from 100-150 x4 so 400-600 a month. Can pay this off in 8-12 months, quicker if you get a side job. Just depends on how much you want to sacrifice to finally get out of this debt.

  16. #16
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    LoL yeah, if I don't cook, someone else in the house will. I can easily live frugally. I don't need much, and have tons to do. It's not like I'm going out every day squandering money on entertainment. Point taken. I'll leave my 457k alone for the time being, and only take it if I really need it.

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    Yeah I live off about $20 a week since moving home. I did splurge on building a new PC this week, but outside of the cable bill about all my other income goes to medical bills. My g/f isn't always too keen about living with my mom but she was also able to afford to get her Master's thanks to living there, you should be able to catch up just fine without rent hanging over your head. It sucks sometimes especially if you've already lived away from home before like I did, but the reality of the economic situation is that it's better to suck it up and chip away at your debt while you can.

  18. #18

    Quote Originally Posted by Odesseiron View Post
    LoL yeah, if I don't cook, someone else in the house will. I can easily live frugally. I don't need much, and have tons to do. It's not like I'm going out every day squandering money on entertainment. Point taken. I'll leave my 457k alone for the time being, and only take it if I really need it.
    Look into side jobs though like delivering pizzas, tutoring, helping people move or some shit. Those small jobs add up quickly if you keep at them. Only time I would recommend taking out your 457k out is if you are on the verge of bankruptcy and you are nowhere close.

  19. #19

    I would honestly just use most of the unemployment money for paying off the CC. Taking out of a 457k is just bad. It would take a while for interest to rack up to the $1,200 extra you would have to take out due to the taxes that you get hit with.

  20. #20

    Don't dip into your 457, it'll cost you more money than the debt ever will, unless you plan to pay it off over 30+ years...which you don't.

    Since 457s are tax-advantaged, and you are limited on how much tax-advantaged income you can put into them yearly, meaning there's a solid cap on what you can contribute.

    Over 30 years that $6000~ taken out now will cost you nearly $30,000(or more, I'm being very modest in my average returns), where this $5000 of debt will likely never cost you more than 7k.


    tl:dr: Don't do it, it's stupid.

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