My aunt, who has ALS/Lou Gehrig's Disease had to purchase a craftmatic bed (she can't lay flat or will die), a wheelchair, and modify her home to accommodate a wheelchair. She took some money from her 401k (she is only 57) to pay for these expenses. Now the government is requiring that she pay back $7000 in taxes. Is there anything she can do since she is disabled (can't walk/move limbs) as this is taking a huge chunk out of her income (basically her grocery bill)? I mean she is disabled, can't someone, somewhere help her or the government give her a tax break due to medical expenses?
2007-12-03 07:52:19 · 2 answers · asked by magnoliabelle67 2 in Business & Finance ➔ Taxes ➔ United States
All these qualify as medical expenses which are deductible on her Schedule A.
Unfortunately, the fact that obtaining the money used to pay for these expenses triggered other taxes is irrelevant to the IRS.
The $7000 are not taxes she is "paying back". The original contributions to her 401k were never taxed. By breaking the rules and cashing in early, she is required to pay the taxes she would have normally paid on this income.
2007-12-03 09:32:59 · answer #1 · answered by neoplop 7 · 1⤊ 0⤋
Did she take the money out but not show them on her income tax return? If so, then she owes the tax from whenever she took it out. Sorry.
2007-12-03 09:45:23 · answer #2 · answered by Judy 7 · 0⤊ 0⤋