I have an IRA acct and want to withdraw $40,000. I was told the bank has to withhold 10% for taxes, and another 10% penalty because I am under 59 1/2 (I think this was the age). Will I be able to deduct that 10% penalty from my taxes next year? Serious answers only please.....Thanx.
2006-08-05 08:11:03 · 7 answers · asked by Imamamea 2 in Business & Finance ➔ Taxes ➔ United States
No, you can't deduct any of the taxes or penalties associated with the early distribution. This would circumvent the policy underlying these accounts. IRAs allow you enjoy earnings in your invested money tax free until distributed (or when contributed in the case of a Roth IRA). This way you don't pay taxes annually on interest, dividends, and capital gains. There is no penalty in certain circumstances such as disability, tuition, home purchase, etc, but the distributions are still taxed.
2006-08-05 13:17:14 · answer #1 · answered by Tax Man 2 · 2⤊ 0⤋
No, taxes are taxes, and a penalty is a penalty. Some IRA administrators allow you the whole amount and will send you a 1099 and you have to claim it on your income tax, but it sounds as if yours isn't one of them. It doesn't hurt to ask. It's just a way of putting off the inevitable, though.
P.S. What's the purpose of the withdrawal? That can have some issues, too.
2006-08-05 09:30:47 · answer #2 · answered by misslabeled 7 · 0⤊ 0⤋
2012 tax tear year is now history as of December 31 2012 and now immediately's January 18 2013 perfect. and you're purely now thinking this early withdrawal out of your rollover classic IRA account of 20000 with the ten% early withdrawal penalty quantity off 2000 perfect at the start. 2000 plus your what ever your marginal tax fee bracket quantity could be throughout the 2014 tax submitting season for the 2013 tax year perfect. and not set aside yet use the 1040ES quartely predicted tax form and the 4 charge vouchers to pay your quartely predicted in good condition criminal duty for each quarter beginning April 15 2013 and for variety one million 1040 charge with the voucher and 2, 3, each and each quarter and then the perfect # 4 charge and voucher Due January 15 2014 for the 2013 tax year. And sure you're superb an extraordinarily massive decision at present on your existence yet you will ought to do what you do ought to do at present perfect. desire which you hit upon the above enclosed guidance useful. 01/18/2013
2016-10-01 12:29:32 · answer #3 · answered by ? 4 · 0⤊ 0⤋
no. That is a U S government penalty for withdrawing early. You will also have to show the $40,000 withdrawal on your taxes for this year. And the $40,000 will be in addtion to your other income which may throw you into a higher tax bracket for the year and increase your taxes. And do not forget your state taxes which also will increase.
2006-08-05 08:17:55 · answer #4 · answered by Anonymous · 0⤊ 0⤋
No you will not be able to deduct the penalty. You will be credited for the income tax withheld from your distribution. You may qualify for other credits or have the penalty waived. It will depend on what you are using the money for (eic. education,home buying etc.). Seek tax advise from a professional before withdrawing the money.
2006-08-05 08:36:43 · answer #5 · answered by Ren 3 · 0⤊ 0⤋
Nope. First answer was correct. Your actual tax liability will likely exceed the 10% that they withhold.
2006-08-05 08:32:24 · answer #6 · answered by Carlos R 5 · 0⤊ 0⤋
No you cannot deduct it.
2006-08-05 08:31:04 · answer #7 · answered by T 2 · 0⤊ 0⤋