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How Does A 401k Cash Out Effect My Unemployment In Texas?

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Did you loose your job or did you quit? Are you collecting Unemployment? In Texas unemployment is not based on your income. It is based on the amount you earned while you were employed and why you became unemployed. Be careful on these issues.

Your employer will fight your unemployment application. Get your ducks in a row, be honest but tell the story from your perspective. Know the rules, make no admissions of activity that your employer can't prove, and by proof I mean video tape of the incident. In order to be prevented from collecting unemployment your employer has to prove a very egregious act to support the firing and prevent your collecting.

On the 401 K issue. Unemployment is not going to look at your 401 k distribution. But there is a more important consideration.

Can you take a distribution without a penalty because you are unemployed? Very important. Second, if you can take the distribution without penalty how much can you take before you screw yourself into a high tax bracket. You may want to talk to your tax preparer and take a strategic distribution in 09 and then another in 10.

What ever you do make sure its the right thing and proceed with much caution. Additionally, don't be afraid to call the Texas workforce commission and ask the question that you want to know the answer to. And you can call the IRS and get information from them, but always have the person you speak to identify themselves and refer you to the publication that contains the INFO you want.

Good Luck

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