How much tax for cashing in an IRA?

Question

I'm going to cash in a 4,000 IRA soon, and wondered if anyone knows approx. how much in tax I will have to pay at tax time next year

Answer 1

Unless it meets the requirements of an early withdraw, they withhold 10%. Not sure about the tax situation. It probably just counts as regular income.

Answer 2

If it's a traditional IRA, not a Roth, you'll pay income tax at whatever your rate is, and if you are under age 59-1/2 you'll pay an additional 10% penalty for taking it out early.

So if you are in a 15% bracket, you'd pay $1000 tax including the penalty.

Answer 3

If it’s a roth IRA the answer is 0 unless you are some of what you are cashing in is more than the amount you contributed. Then you would add the amount gained to your income and figure the tax.

It it’s a traditional IRA then its all taxable and you must add the amount to your income to figure the tax.

For either type you probably will have to pay a 10% penalty on the taxable amount unless you meet one of the exceptions.

I am including links to 1040ES so you can figure the tax and pub 590 so you can read more about it.

http://www.irs.gov/pub/irs-pdf/f1040es.pdf
http://www.irs.gov/pub/irs-pdf/p590.pdf

Answer 4

You will owe income tax based on regular rates plus a 10% additional tax if you are under 59 1/2

Answer 5

20 % penalty + $4000 is added to your taxable income