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Discussion Forum Index --> Basic Tax Questions --> 10% Penalty for Early Distribution of IRA-Medical Expense Exception
Discussion Forum Index --> Tax Questions --> 10% Penalty for Early Distribution of IRA-Medical Expense Exception
Maverick (talk|edits) said:
| 28 April 2008
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| Facts: Husband, age 65, needs kidney transplant. Wife, age 54 has $400,000 Plus in IRA. Can wife receive Distribution of $150,000 to pay for medical expenses of husband (MFJ)and NOT be subject to 10% penalty (forget about 7 1/2% issue)? Section 72(t)2(b) addresses the employee (participant), not any dependent or spouse. I can find nothing in Regs, rulings, publications, announcements, cases. committee reports, etc. I can easily understand what makes common sense, but I am looking for some authoritative source. Your responce will be welcome and sincerely appreciated.
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BEGooding (talk|edits) said:
| April 28, 2008
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| I expect if medical expenses are otherwise allowable as a deduction on 1040 that taxpayer could claim the exception regardless of for whom the medical expenses are incurred. Form 5329 instructions say the exception #5 applies for "the amount you paid for unreimbursed medical expenses during the year minus 7.5% of your AGI". If it doesn't say you can't take it for wife paying for husbands medical than I say go for it.
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Tyoungea (talk|edits) said:
| 1 May 2008
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| I have a client that received an early distribution from an annuity and has medical expenses for her husband who has cancer. The amount is over the 7.5% over their AGI so they qualify for the exception. (She is under 59 1/2). My question is: I use ProSeries and I have tried to fill out the 5329, but I'm having to override all my totals. Am I doing something wrong?
Thanks for any input.
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Jdugancpa (talk|edits) said:
| 1 May 2008
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| I put in a dummy 1099-R for $10,000 with distribution code = 1. $1000 early withdrawal penalty appears. Then I went to Form 5329-T and put $10,000 on Line E of the "Smart Worksheet" following line 1 and the 10% penalty goes away. Give that a try.
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Tyoungea (talk|edits) said:
| 1 May 2008
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| Thanks Jdugancpa, I think it is not going away is because when I bring up the 5329-T it has the incorrect taxpayer on there. It does nothing. Is there somewhere to link them?
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Tyoungea (talk|edits) said:
| 1 May 2008
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| I guess that is a DAAAAAAAAAAAAA thing! Thanks so much!
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Death&Taxes (talk|edits) said:
| 1 May 2008
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| But wait a minute, Form 5329 says payments from annuities will not qualify for this exception. Did I miss something?
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Jdugancpa (talk|edits) said:
| 1 May 2008
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| You might be correct on that point. I don't know without looking.
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Tyoungea (talk|edits) said:
| 2 May 2008
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| Yes, Death&Taxes you are correct, I did find out though that this was a 401K. Thanks for the help.
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