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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.


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

Charles Markham, EA


20+ yrs experience

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