Discussion:EARLY DISTRIBUTION EXCEPTION FOR HIGHER EDUCATION

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Discussion Forum Index --> Basic Tax Questions --> EARLY DISTRIBUTION EXCEPTION FOR HIGHER EDUCATION
Discussion Forum Index --> Tax Questions --> EARLY DISTRIBUTION EXCEPTION FOR HIGHER EDUCATION

TINA (talk|edits) said:

16 February 2008
CAN EXPENSES FOR HIGHER EDUCATION PAID IN 2007 BE DEDUCTED ON FORM 5329 FOR THE 10% EXCEPTION? THE FUNDS WERE WITHDRAWN FROM

A RETIREMENT ACCOUNT (NOT AN IRA). EXPENSES INCLUDE TUITION, ROOM & BOARD FOR 2007 AND 2008. ALSO DOES A MEAL PLAN QUALIFY?

Kevinh5 (talk|edits) said:

16 February 2008
IRC 72(t) - look it up

TINA (talk|edits) said:

17 February 2008
I looked it up on instructions for Form 5329, Pub 590 and Pub 575. I did not see that this exception only applies to an IRA not a retirement account from work. In the proseries instructions, it states that the penalty exception only applies to an IRA

withdrawal.

Rgtaxservice (talk|edits) said:

17 February 2008
Pub 590 lists the exception for higher education. The HE exception is not referred to in Pub 575 because it is not an exception for non-ira accounts.

Read Sec. 72 (t)

DZCPA (talk|edits) said:

17 February 2008
Best to have your clients roll 401K money to an IRA and then withdraw from IRS to those items on the exception list.

NYEA (talk|edits) said:

17 February 2008
"Best to have your clients roll 401K money to an IRA and then withdraw from IRS to those items on the exception list."


Typically, these taxpayers are STILL working. If that's the case, they can generally only take a "hardship withdrawal" from the 401K but these distributions can NOT be rolled over into an IRA as per ยง402(c)(4).

Wwtaxes (talk|edits) said:

17 February 2008
BTW, thanks to those who posted the reference to look this up. I find this very helpful, since I often get lost in the IRC. I'm slowly learning my way around it.

JeffreyFoster (talk|edits) said:

18 February 2008
Tina, there is a very good discussion on the type of withdrawal you are asking about at www.ustaxcourt.gov within the below mentioned court case. I found it by doing a search for 72(t)(2)(E).


RICHARD L. AND STEPHANIE S. BARBEE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Kenneth135 (talk|edits) said:

27 March 2008
My client took out of his IRA 50,000 and paid for his students tuition and he is under 59.

Since it was for tuition he should not have to pay the 10% penalty for early withdrawal of his IRA. BUT - This was the students last year in college and the student got a job and the parent could not take the student as a dependent for the year. So does that mean since the parent cannot take his kid as a dependent, he has to pay the 10% penalty. That doesnt make sense since when he paid for the tuition, his kid was his dependent. Can anyone help with this?

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