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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My adjusted gross income for 2009 will be appoximatley $40,000.

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My adjusted gross income for 2009 will be appoximatley $40,000. If I cash in an IRA valued at $18,000 during 2009 tax year what amount of addtional taxes will I pay on these earnings? I believe my tax bracket would be 25%. I would not qualify for any of the exemptions for early withdrawals. I am aware I would have an additional 10 percent fee from the IRs for early withdrawal before 59 and 1/2 years of age. I just need an estimate on the tax ramifications in order to make my decision. Any help you can give me would be appreciated.
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
Hello artist,

Can you please tell me if you file your return as single or married?

Do you have any children or other dependents that you claim?

Customer: replied 5 years ago.
I will either file single or head of household

two dependents (children)

My adjusted gross income for 2008 was 47,979. I had to start paying spousal support so I subtracted 6,000 from the gross income which in reality it would be 4,800 dollars so it would be closer to $42,000. My taxable income was 29,000 so my tax bracket would not be 25% but 15%. My income will be the same since my salary was frozen.

Expert:  Merlo replied 5 years ago.
Hello artist

Do the two children both live with you for most of the year?

Customer: replied 5 years ago.
yes I am the only parent who can claim the children as a dependent
Customer: replied 5 years ago.
I recieve 100.00 a month child support since my ex husband is unemployed if this matters
Expert:  Merlo replied 5 years ago.
Artist,

One more question please. What are the ages of your children. I need this to determine if they are eligible for the child tax credit which is a considerable amount.
Customer: replied 5 years ago.
yes,10 and 15
Expert:  Merlo replied 5 years ago.
Hello again artist,

If your total income is around $48,000 and you pay spousal support of $6,000, this brings your income down to $42,000. If you cash in an IRA valued at $18,000, that brings your income up to $60,000 for the year.

You would be allowed a standard deduction of $8,350 for filing as HOH and then 3 personal allowances of $3,650 each, for total deductions of $19,400. That leaves you with taxable income of $40,600 for the year.

Your tax on this amount would be $5,492. You would also owe the 10% early withdrawal penalty on the IRA, so that adds another $1,800 to your tax, for a total of $7,292.

Since your children are both under the age of 17, you would get a $1,000 direct tax credit for each of them, which will reduce your taxes owed to $5,292 for the year.

Even with the $60,000 income, your top tax bracket is still 15%. What you need to do is take a look at how much tax is being withheld from your paychecks and figure out how much you will have paid in at the end of the year through that withholding. The difference between that and the $5,292 will be the extra tax you have to pay.

If this was helpful please press the Accept button. Positive feedback is also aprpeciated.

Thank you artist.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Merlo
Merlo
Tax Professional
9783 Satisfied Customers
25+ years tax consulting. Specializing in returns for US citizens living abroad