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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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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.

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income taxes plus an additional 10% early withdrawal penalty if you are under the age of 59-1/2 when the funds are withdrawn.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.

 

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Thank youCustomer/p>

 

 

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