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CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3740
Experience:  over 40 years experience in tax matters
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I HAD AND ANUITY WITH MET LIFE . I HAD EMERGENCY AND HAD TO

Customer Question

I HAD AND ANUITY WITH MET LIFE . I HAD EMERGENCY AND HAD TO WITHDRAW EARLY I AM OVER 60 . THE TOTAL AMOUNT OF THE ANUITY WAS ABOUT 49,000 . MET LIFE TOOK OUT ABOUT 4500 IN FED TAXES AND OVER 3500 BECAUSE I WITHDREW TO EARLY. CAN I GET ANY TAX RELIEF FOR THE 3500 IN PENALTY TAKEN OUT
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

If they withheld the money in taxes you can claim the taxes paid on the lower part of page 2 of the 1040. If it was for an early withdrawal penalty tax, same rules apply. If anything else, please let me know and I can give you additional information. Please provide details.

Customer: replied 3 years ago.

YOU SAID PAGE 2 WHAT LINE ARE YOU REFERRING TO AND WHAT ABOUT LINE 30 DOES IT APPLY TO THE EARLY WITHDRAWAL CHARGE

Expert:  CGCPA replied 3 years ago.

The gross amount of the annuity withdrawal gets reported on form 1040, page 1, line 16a. The taxable amount gets reported on form 1040, page 1, line 16b. The penalty computation gets reported on form 5329 and transfers to form 1040, page 2, line 58. The withholdings get reported on form 1040, page 2, line 61.

 

You stated that the withdrawal was due to an emergency. There are exceptions to the early withdrawal penalty which, if they apply, will either reduce or eliminate the penalty entirely. I will get the reference for you and return momentarily.

Expert:  CGCPA replied 3 years ago.

The following is direct from the IRS web site http://www.irs.gov/ and may be useful.

 

Retirement Topics - Tax on Early Distributions

Generally, the amounts an individual withdraws from his or her IRA or other qualified retirement plan before reaching age 59½ are called "early" or "premature" distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies.

Exceptions: There are several exceptions to the age 59½ rule. Even if individuals receive a distribution before they are age 59½, they may not have to pay the 10% additional tax if they are in one of the following situations.

  • They receive a distribution from a retirement plan (other than an IRA) after leaving a job and are age 55 (age 50 for qualified public safety employees).
  • They have unreimbursed medical expenses that are more than 7.5% of their adjusted gross income.
  • The distributions are not more than the cost of their medical insurance (IRA only).
  • They are disabled.
  • They are a beneficiary of a deceased plan participant or IRA owner.
  • They are receiving distributions in the form of an annuity.
  • The distributions are not more than their qualified higher education expenses (IRA only).
  • They use the distributions to buy, build or rebuild a first home (IRA only, and limited to $10,000).
  • The distribution is due to an IRS levy.
  • The distribution is a qualified reservist distribution.
  • The distribution is made to an alternate payee under a QDRO.
  • They are receiving a distribution timely made to reduce excess contributions under a 401(k) plan.
  • They are receiving a distribution timely made to reduce excess employee or matching employer contributions (excess aggregate contributions).
  • They are receiving a distribution timely made to reduce excess elective deferrals.
  • They are receiving a permissible withdrawal from an EACA.

The 10% tax is reported on the appropriate line of Form 1040. The individual may also need to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Form 5329 does not need to be filed if Form 1099-R shows distribution code "1" or "J" in Box 7. In this instance, the individual need only enter the 10% tax on the appropriate line of his or her Form 1040 and write "no" on the dotted line next to the appropriate line. If the individual meets one of the exceptions to the tax, and the Form 1099-R does not indicate an exception, or if the exception shown is incorrect, he or she must file Form 5329 to claim the exception.

Early Distributions from SIMPLE IRAs:

Two-year rule. To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which an employee first participated in his or her employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. The 2-year period begins on the first day on which contributions made by the employer are deposited in the employee's SIMPLE IRA.

After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan).

Additional Tax on Early Distributions

The additional tax on early distributions (discussed above) applies to SIMPLE IRAs. If a distribution is an early distribution and occurs during the 2-year period following the date on which the employee first participated in his or her employer's SIMPLE IRA plan, the additional tax on early distributions is increased from 10% to 25%.

If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed.

Additional Resources:

Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
Publication 575, Pension and Annuity Income
Publication 590, Individual Retirement Arrangements (IRAs)
Top Ten Facts about Taking Early Distributions from Retirement Plans
Topic 558 - Tax on Early Distributions from Retirement Plans
Instructions for Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
FAQs on General/Taxability Issues including Distributions, Early Withdrawals, 10% Additional Tax, Defaulted Loans
Publication 554, Tax Guide for Seniors
Publication 970, Tax Benefits for Education

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