Early Withdrawal

Question: What percent of taxes do federal and state take out of your IRA?

If you withdraw from your IRA early and don’t meet one of the exceptions I understand there is a 10% penalty, plus a federal and state tax. Now when I try to make the withdrawal it asks me what percentage I’d like it to take out for federal and state. Federal has to be at least 10% up to 99% and state can be 0% (I live in Michigan). I was just wondering how many taxes I should have them take out so I don’t have to pay it back at the end of the year. Thank you very much!

Answer: Dear Pell: This question requires us to know your tax bracket for the year. The IRA distributions are taxed as income and you will need to know your marginal tax rate (this is the rate at which you are taxed after all adjustments).

If this year is last last year, look at your return and calculate your tax bracket. This will the % you will use to figure with holding on the IRA $$.

Under $35K 15% will work, up to $87K 25% these are “WAGs”.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent

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