what are the tax implications.
2006-12-18 16:53:40 · 6 answers · asked by LD2333 1 in Business & Finance ➔ Taxes ➔ United States
If you take a distribution of any amount you will have to pay income taxes on the amount withdrawn. Because it is an inherited IRA any withdraw from the account will not be subject to the 10% early withdrawal penalty. This is because there is an exemption from this penalty when distributions are made by reason of the death of the account owner. This is code 4 in box 7 of the 1099R form that would be sent to you by the trustee.
There are rules to follow as to when you have to start taking distributions from the account. The first distribution must be taken by December 31st of the year after the death of the account owner. Failure to do so could result in a penalty of 50% of the amount that should have been taken by that time. Legally you can take a minimum distribution annually over the remainder of your life or you can take any other amount you want.
I would make sure that if you take the whole amount you are not being placed into a higher tax bracket. If you are take it out over several years.
2006-12-18 22:14:43 · answer #1 · answered by waggy_33 6 · 5⤊ 0⤋
There are no tax implications other than paying tax on any earnings in the IRA from the time you inherited the money to the time that you cash in the IRA.
If the estate was subject to estate taxes, those taxes would have been paid by the estate before you received the IRA.
2006-12-18 19:17:01 · answer #2 · answered by Steve 6 · 0⤊ 4⤋
Not sure but think you must pay taxes on the money at the time you draw it out. The fund administrator can tell you the laws about taxes, etc.
2006-12-18 17:01:00 · answer #3 · answered by Anonymous · 0⤊ 0⤋
I think you need to speak to a tax or estate attorney in your state. Each state has different estate/tax laws and you may get some weird answers from people just wanting their two points here. Shop around and get an attorney with a flat fee, to avoid any surprise charges.
2006-12-18 17:02:05 · answer #4 · answered by Anonymous · 1⤊ 1⤋
It may depend on your state but usually you will have to pay income tax on the money plus a 10% penalty. If you don't have much saved for your own retirement you may just want to rollover the money to your own IRA or Roth IRA you'll be that much closer to your own retirement plans.
2006-12-18 17:09:58 · answer #5 · answered by QandA 3 · 0⤊ 2⤋
There are prison implications of you going to jail because that sounds fishy right off the bat.
2006-12-18 17:01:00 · answer #6 · answered by Randy Jay 1 · 0⤊ 6⤋