Unfortunately - that is true.
Assuming at the time of contribution - that amount was deducted from your taxable income - please confirm...
the distribution is your taxable income - $12,000 distribution should be added to your income and will be taxable at your marginal tax rate - this if you in 15% tax bracket - 15% federal income tax will apply; if you are in 35% tax bracket - it will be taxed at 35%.
As the bank took 20% withholding - they are required to do so - these money will be credited on your tax return - the same way as withholding from wages.
In additional as you are below 59 1/2 - the distribution is generally subject of 10% early distribution penalty (there are some exemptions - we still need to verify if you may use any)
If you just recently cashed your IRA - you have up to 60 days to go to a different bank and put the money into another IRA CD. In this case the whole transaction will be treated as rollover and will not be taxable.
Let me know if you need any help.
Tax Preparer
Personal Investment, Tax Preparation
can i roll over back in to the bank that i just cashed in the CD from? will i lose the 20% they are holding for taxes if i go to another bank or can i withdraw that money and what kind of account are they holding it in? how do i ask to with draw that money-they were
going to take care of paying the tax. I have no prove that money is mine. thanks so far kk
The IRS prohibits to borrow from the IRAs - if you put the money back into the same bank - that will look as you borrow the money and put them back.
To avoid problems - I suggest to put the money into a different bank.
The amount of your distribution is $12,000 - so to avoid any tax liability - you need to get somewhere the amount which was withheld and put into another bank $12,000 within 60 days after you took the money.
You need to tell the banker that these are IRA money which you are rolling over from another bank.
If you put only $10,000 - remaining $2000 will be your taxable distribution.
The $2000 with were withheld will be credited against your tax liability on your tax return.
Yes - that is correct as long as you will put the money into another IRA CD withing 60 days.
Please see for reference - http://www.irs.gov/retirement/article/0,,id=160469,00.html
A tax-deferred rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it within 60 days to another eligible retirement plan.