Discussion:Capital Loss on Retirement Assets, Early Withdrawl Penalty
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| {{ForumReplyPost|UserID=Kevinh5|Date=12 March 2009|Text=I read your profile, Larry, and understand where you are coming from. Unfortunately, David doesn't have the same background. He doesn't specialize in taxes like you and I do.}} | {{ForumReplyPost|UserID=Kevinh5|Date=12 March 2009|Text=I read your profile, Larry, and understand where you are coming from. Unfortunately, David doesn't have the same background. He doesn't specialize in taxes like you and I do.}} | ||
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| + | {{ForumReplyPost|UserID=Taxestaxes|Date=12 March 2009|Text=I am glad to see a post on this topic! I have had so many calls and questions from people complaining that their 401k has lost all this money and won't that loss be great on their return, yada yada.....I have to be the bearer of bad news to explaint that it wont affect their taxes. And these people are taking any money out, they just think the loss can be shown on their taxes!! I politely explained to one lady, who did withdraw her money that the benefit she got by putting in $5000 in her 401k was far better than the affect of withdrawing $500. I dont think she liked that too well! :) But anyway, I think more and more preparers are going to here this from clients as people loose more and more in their 401Ks. }} | ||
Revision as of 18:53, 12 March 2009
Discussion Forum Index --> Basic Tax Questions --> Capital Loss on Retirement Assets, Early Withdrawl Penalty
Discussion Forum Index --> Tax Questions --> Capital Loss on Retirement Assets, Early Withdrawl Penalty
| 11 March 2009 | |
| In these hard times I had a client withdraw from her 401K. I know she will be penalized, but if she withdraw everything and had a capital loss why can she not take a capital loss deduction? From my point of view if she never placed the money into her 401K, paid the tax then recorded a loss she would have been better off? Sounds like a small injustice in the code. Answers...theories? | |
Wonder Woman USA (talk|edits) said: | 11 March 2009 |
| There are no capital gains or losses on retirement plans.
If your client withdraws completely from the plan and the proceeds come to less than the basis (how much she put into the plan) then she can take the loss as a miscellaneous deduction on Schedule A -- subject to its being more than 2% of her AGI. | |
| 11 March 2009 | |
| Depends on what her marginal tax rate was when she invested the money and what it is now. | |
| 11 March 2009 | |
| David, as a CPA, do you understand what constitutes capital gain/loss income and what constitutes ordinary income? | |
| 11 March 2009 | |
| Well, not all, but certainly most. I wonder how people think this country managed to survive before trillion-dollar government budgets.
But as long as "we the people" continue to accept a federal government that has more power than King George ever did, we must render to Caesar that which is Caesar's, regardless of our feelings on it. If you don't like it, complain to your Congressman or become your Congressman. | |
| 11 March 2009 | |
| We get paid to decipher the manifold rulings of Caesar to determine the smallest number that must legally be rendered to Caesar. Interpretation of the law is one thing, but blatantly reinventing it for your own benefit is something else. | |
| March 11, 2009 | |
| Wonder Woman - The Schedule A deduction (the excess over 2% of AGI) is only for losses on total distributions from traditional IRAs and Roth IRAs.
However, on a decedent's final return only, the unrecovered investment in a pension can be deducted on line 28 of Schedule A, not subject to the 2% restriction. | |
| 11 March 2009 | |
| never underestimate what a taxpayer will do to avoid paying a tax | |
| 12 March 2009 | |
| You cannot take a loss on any retirement account, even on SCH A, until and unless the account has a tax
basis. Meaning after tax contributions. It is only after tax contributions that can be taken once the account is fully closed, lost or distributed. At that point if and only if there was a tax basis (after tax contributions) then you take the loss of SCH A subject to the 2% of AGI deductible. | |
| 12 March 2009 | |
| I read your profile, Larry, and understand where you are coming from. Unfortunately, David doesn't have the same background. He doesn't specialize in taxes like you and I do. | |
Taxestaxes (talk|edits) said: | 12 March 2009 |
| I am glad to see a post on this topic! I have had so many calls and questions from people complaining that their 401k has lost all this money and won't that loss be great on their return, yada yada.....I have to be the bearer of bad news to explaint that it wont affect their taxes. And these people are taking any money out, they just think the loss can be shown on their taxes!! I politely explained to one lady, who did withdraw her money that the benefit she got by putting in $5000 in her 401k was far better than the affect of withdrawing $500. I dont think she liked that too well! :) But anyway, I think more and more preparers are going to here this from clients as people loose more and more in their 401Ks. | |
