have to claim it on your taxes at the end of the year? If you have already paid the taxes up front, it looks like you would not need to claim it again to pay MORE taxes.
2007-08-26 08:25:55 · 8 answers · asked by Miss M 1 in Business & Finance ➔ Taxes ➔ United States
If you take a distribution from your IRA prior to reaching 59 1/2 yrs of age you must report the amount of distribution on your individual tax return as ordinary income. You will also report the "withholding" take from the distribution at the time you make that distribution. The amount of tax you pay on that distribution will be determined by all of your other taxable income. The withholding amount would go to reduce your tax liability. You will have an additional problem in that there is a 10% penalty for takeing an early distribution (pre-59 1/2 ). The trick to understanding all of this is that the money taken out of your distribution is simply withholding just the same as on your W-2.
2007-08-26 10:19:14 · answer #1 · answered by ? 6 · 1⤊ 0⤋
The taxes you pay when you withdraw the money is an estimate for withholding, just like the tax than is withheld from a paycheck. At the end of the year, you fill out a tax return to calculate the actual tax you owe, and what was withheld is applied to that. If too much was withheld, the extra gets refunded to you - if not enough was withheld, you pay the additional amount.
If you cash out your IRA and are under 59-1/2, you'll owe a 10% penalty on the amount you withdrew, plus the income tax at your regular rate that you would owe anyway when you withdrew the money. If you are in a 15% bracket, that would mean that the tax you'd owe on the withdrawal would be a total of 25% of the amount withdrawn. Unless you had enough withheld at the time you took the money out, you will owe the additional amount when you file your return.
2007-08-26 10:44:03 · answer #2 · answered by Judy 7 · 2⤊ 0⤋
Money into a Roth is after-tax. A traditional IRA is pre-tax. So that means you've already paid the taxes on your Roth contributions. You may still want to think about 10% withholding on it. You can take it out, not pay taxes as long as you repay the Roth within 60days.
2016-05-18 03:21:11 · answer #3 · answered by minna 3 · 0⤊ 0⤋
Hi, if you cash out your IRA, you do NOT have to pay taxes on it again. That would completely destroy the point of getting taxes withheld from your IRA cash out in the first place, so make sure when you're preparing your taxes you note it accordingly.
Here's some other information on IRAs and financial planning. I think you might benefit from talking with a financial planner.
http://www.plannerconnect.com/retirement-planning-iras.html
http://www.plannerconnect.com/financial-plan.html
2007-08-29 07:42:04 · answer #4 · answered by homerocks7001 2 · 0⤊ 0⤋
Your tax return is a reflection of the entire year. If you paid the taxes when you cashed in the IRA then report the cash in and the taxes paid on the same 1040form.
2007-08-26 08:31:05 · answer #5 · answered by onparadisebeach 5 · 3⤊ 0⤋
You have to report it as taxable income. You also claim whatever you paid already. What you paid allready was at a flat 20% withholding rate; your actual rate may be more or less. You may owe or may get a refund.
Same concept as with wages and salaries: something is withheld, but you report everything on your 1040 and either pay money or receive a refund, depending on whether too much or too little was withheld.
2007-08-26 08:32:31 · answer #6 · answered by StephenWeinstein 7 · 3⤊ 0⤋
You do reflect it on your taxes, however, the amount of tax you paid is also reflected. Hence there is no double taxation. Hope this helps.
2007-08-26 08:29:23 · answer #7 · answered by Chuck Gallagher 2 · 3⤊ 0⤋
why wouldn't you bank the tax money in an interest bearing account and it when it comes due? Why give uncle sam the interest? No technically you wouldn't owe again.
2007-08-26 08:29:35 · answer #8 · answered by Anonymous · 0⤊ 1⤋