Early Withdrawal

Archive for December, 2009

Question: I am in the process of rolling over my 401k and pension?

I have a seperate 401K and a seperate pension account which I would like to role over. However, I’m 57 years old and I will need to use some of my pension for the next 2/12 years. i am eleigle to take my pension form the company I have retired from immediate;y if I left it with them. I had heard about a rule 72T how does that help me.

Answer: Rule 72T applies to you. You could use it to take a monthly amount from your 401(k) without penalty starting now. There are some other restrictions and this might not be the best plan for you anyway but look into it and play with some numbers.

Question: I took money out of an IRA last month, but I want to roll some of it back into the same account.?

Am I allowed to roll it back into the same account, or do I have to roll it into another IRA account in order to satisfy the IRS 60 day rule for not being taxed on an Ira Withdrawal?
Caveat Emptor, I only want to put some of it back into an IRA. I searched the internet and I didn’t find anything that required me to put the whole amount back in. I realize there are taxes and penalties on the part that is a permanent withdrawal. Do you know of any site that says that I am required to put the full amount back in?

Answer: Dear Cissy: Either works but I would NOT open a new account as the new trustee can not help you with coding the roll over and the original trustee will not know about it.

Roll over the money to the original account and pray they code it correctly on your 1009-R next year. If it is not coded correctly it can be reported correctly on your tax return but I guarantee letters will be generated from the IRS, a real big pain in the you know what. I have written several letters this past year to try and explain the r/o monies. You are on target with the 60 day rule.

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

Peter Newman, Scott Borden, Michael Lee: Economics 2009

Question: Can anyone tell me the penalty for Early Withdrawal from a simple IRA?

Any information will help, I need to know how it will effect me when I file my taxes and what all the penaltys are.

Answer: Don’t do it if you can avoid it.

You must pay the taxes as if it was taxable when you made the contribution, PLUS a 10% penalty on top of that. E.g. if that money would have been in the 28% bracket, you will be paying 38% on your money.

There are a few reasons you can take money out (hardship, etc.) that avoid the penalty, but you must still pay the taxes.

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