I know I have to file taxes on it even though I have no other income. Is there an exception for disabilty on the 20% my old employer withheld so i can get it back? Anyone know what IRS brochure covers this in normal English?
2007-02-05 09:00:19 · 2 answers · asked by been there done that 2 in Business & Finance ➔ Taxes ➔ United States
The 20% withholding is no different than money withheld from your paycheck. It's mandatory and there are no exceptions. Since you're on disability though, you likely won't get hit with the extra 10% penalty. Which is good news. Because now when you file your taxes, if the amount of tax that you owe is lower than the amount that they withheld, you will get a refund.
2007-02-05 09:42:10 · answer #1 · answered by digdowndeepnseattle 6 · 2⤊ 0⤋
If you are totally and permanently disabled, you qualify for a waiver of the 10% penalty on early withdrawals. You still must pay income tax on the amount that was withdrawn, however. There's no way around that.
You file Form 5329 to account for the early withdrawal and the waiver of the penalty. You can get it and the instructions on the IRS website. Unfortulately the instructions on it are anything but clear -- you can thank Congress for that.
2007-02-05 09:18:01 · answer #2 · answered by Bostonian In MO 7 · 2⤊ 0⤋