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Merlo
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Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I put $5,000 in a IRA about 1 and a half ago. I was only able

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I put $5,000 in a IRA about 1 and a half ago. I was only able to deduct $690 on my tax return because my income was too high. If I were to withdraw my money because of hardship, what do I have to claim on my tax form. I made aproximately $1,100. So I will be taking out $6100.


Also, what are the income tax levels for couples. We make aproximately $130,000. I know at certain income amounts your rate goes up.
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

HelloCustomer

 

The $4,310 which you were not able to deduct when you contributed to this IRA will not be subject to any taxes or penalties. However, the $690 pre tax portion of your contribution plus the $1,100 in earnings will both be subject to ordinary income taxes plus an additional 10% early withdrawal penalty if you are under the age of 59-1/2 when the funds are withdrawn.

 

There are some exceptions to the 10% early withdrawal penalty. You can avoid this penalty if the funds are used for one of the following reasons:

 

The early withdrawal penalty will not apply if you become disabled or die or if you use the money to:

  • Purchase a home for the first time ($10,000 lifetime cap)
  • Fund qualified higher education expenses
  • Cover deductible medical expenses
  • Pay health insurance premiums if you have been receiving unemployment compensation for at least 12 weeks
  • Pay a federal tax levy

Based on income of $130,000 a year for both you and your wife, your tax rate on this withdrawal would be taxed at 25%, plus the additional 10% penalty if one of the above exceptions does not apply.

 

If this was helpful please press the Accept button. It is the only way we receive any credit for helping with these questions.

 

Thank youCustomer/p>

 

 

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