Inherited IRA and closed the account- How do I know if I took out the right amount of taxes?

Question

I live in OH. I inherited an IRA in 2006. I closed the account out ($25,000) and asked that they take out the appropriate amount in taxes (so I wouldn’t get hit with owing at tax time and might get money back). They informed me that I had to tell them how much I wanted taken out (what %). I am now hoping I did a good job of overestimating– but am fearful. I had them take out 30%. They then deducted $7,500 off the $25,000. How did I do? (Gezzz I hate tax time.) Also, does Turbo Tax accept information related to something like this? Or would it be better if I went to a human with tax knowledge ?

This was not a spousal IRA. This was my mothers IRA. My understanding was, due to this, I would not have a penalty for early withdrawl.

I'm 45 (but feel 12 when it comes to this type of thing!)

My taxable income is approx $32,000.

Answer 1

I can't answer specifically because I don't know the rest of your tax situation. You would be OK in most cases with the 30% unless your taxable income exceeds $320,000.
Based on your information it would seem that you forgot the state income tax, so you might owe OH something with your return. If you are over paid on the federal and owe to OH I would suggest that you file the federal return as soon as possible, get the refund and then pay OH.
Since this is an inherited IRA you will pay income tax but make sure that there is no 10% early withdrawal penalty computed as that penalty does not apply to your withdrawal from an inherited IRA.
Turbo Tax should be able to handle this transaction with no problem since it is not that unusual.
Good Luck!

Answer 2

If you don't roll it over but just take it out, you'll pay income tax on the amount withdrawn, plus 10% of the total withdrawn as a penalty if you are under age 59-1/2. You could roll it over into something like a CD in an IRA at your bank, and not pay any penalty since it would still be in an IRA.

Answer 3

Depending on your age, what you did with the money, and several other factors, you MAY be liable not only for the income tax, but also a 10% penalty on the withdrawal.

The CORRECT action usually is to take the account and roll it to a special IRA for you. The amount of withdrawal not subject to penalty is a factor of your age.

You may not have had enough tax withheld!

Answer 4

you better check on if you can withdrawl from that ira as depending on what type of Ira it is sometimes you can't withdrawl until you turn 65 because that's an IRA.

Answer 5

it could work both ways you might have payed enough or you may have not but either way they will let you know what it is either they owe you or you owe them but good luck either way