Archive for the ‘IRA Withdrawals’ Category
Ira Withdrawal Tax
June 25th, 2011
Question: Was any Ira Withdrawal relief passed this year ?
The candidates talked of allowing limited IRA withdrawals to be taxed at 10 %. Did that or anything like it actually become law ?
Thanks.
Answer: No.
As of now, there are no changes to previous law.
Rapid City Tax Day Tea Party – Ira Taken Alive
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Ira Withdrawal Buy Home
June 21st, 2011
Question: Withdrawal from my IRA?
I would like to buy a home. I need to withdraw the down payment from an IRA. Will I get slammed with taxes and penalties?
Answer: You will be taxed based on the gross distribution amount added on top of your other income. The trustee would likely withhold 20% of it towards taxes, but that may not cover it (plus any state income tax).
There is no penalty for up to $10,000 IRA distribution towards your first home, but it has to be used for that within a specified period of time. So do not withdraw it until sure that the purchase will happen. See IRS Publication 590.
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Ira Withdrawal And Redeposit
May 17th, 2011
Question: Redepositing part of early distribution from IRA?
I withdrew money from my Rollover IRA to purchase a home early last year. Since the amount was over the $10,000 first time home buyer limit, I was told that if I returned some of the money within 60 days I wouldn’t be subject to penalties. At least that’s what I understood. I couldn’t scrounge much, but I sent back $1,000 within the 60-day time frame.
I received my 1099-R that shows the full amount of the initial withdrawal, but I have not received anything related to the redeposited funds. When I sent it back, it was acknowledged as a 60 day return, so there’s no question about the intent of the funds.
I’m trying to do some work in Turbo Tax and have not been able to determine if the returned money is considered a rollover or a contribution. Of course, if it’s a rollover then there is no penalty, but there is if it’s a contribution because it’s not earmarked as part of the original funds distribution.
Tax pros, what say you?
Answer: Returning the money is classified as a rollover.
Show the money from the 1099-R on line 15A, the money you didn’t return on 15B.
Adjust the amounts on form 5329 as well.