Discussion:****big amount of early distribution****
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Discussion Forum Index --> Tax Questions --> ****big amount of early distribution****
Cherryblossom (talk|edits) said: | 1 April 2008 |
| What should I do with my $38,500 traditional IRA early distribution in July 2007 now?
Help! | |
Chris2lane (talk|edits) said: | 1 April 2008 |
| It depends on several factors. First, if you weren't aged 59 1/2, you'll have to pay income tax and 10% penalty. If you are over age 59 1/2, you'll only have to pay income tax. You will be better served by visiting a tax pro. | |
| 2 April 2008 | |
| Too late to ask advice now...should've asked before you took it out. | |
| 5 April 2008 | |
| What should you do now?
Get ready to write a Big Check to the IRS ....$3,850 Excise Tax...plus Income Tax on $38,500 say 25% or so $8,000 or so...and probably Penalty for failure to timely make estimated tax payments on both...another $1,000 or so....all because you didn't consult a CPA well before July 2007. | |
| 5 April 2008 | |
| I wish people had to fill out a form before taking out early distributions:
1. Do you understand that you will be taxed on this distribution? 2. Do you understand that you may also have to pay a 10% penalty on this distribution? etc, etc. n. Do you understand that this is probably a pretty stupid thing to do? I've had 3 clients do this that really blew me away. The first one took out $85K, more than doubling their income. When they got the tax bill, they couldn't understand why they had to pay tax on it. After all, "it was our money in the first place!" The second one took out $3000, and after penalties and taxes, ended up with about half. Now wasn't that worth it??? And saving the best for last: She took out $75K (again doubling income), but can't really remember doing it, and has no idea what she spent it on. People aren't only tapping using these like their bank accounts, they seem to actually think they are their bank accounts. I just wish they had to jump through more hoops before taking these out. | |
| 2008-04-05 | |
| Had a client take about 8,000 this year. She itemizes and will have a Sch C next tax season. No penalties for her. Excise tax did not cross my mind. | |
