Have a Tax Question? Ask a Tax Expert
Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.
1. For 2010, if your only income was SS disability, then you would not have been able to receive Earned income credit. Earned income credit is based on wages or payment for services, and in limited instances, retirement related disability. If you received a W2 or 1099r for disability, then you may be eligible for EIC---but I would need more information to assess this.
2. I don't see a question here, but I think you are asking if you can take a loss on your IRA withdrawal. If you put the $2000 into the IRA AND deducted the $2000 from your gross income, then you do not have a deductible loss, because that money has never been taxed. If you did not deduct the $2000, but filed a form 8606 as a non-deductible contribution in 1998, then you would have a deductible loss if you withdrew ALL of your IRA balances in 2011---and your total distributions are less than your after tax basis. See page 42 in the following publication for more information:
I am going offline for a few minutes, I will check again within the next hour if you have followup questions.
I am just as "in the dark" as before I asked the questions.
In 2010 the only other source of income besides SS Disability, was a $100.00 Stipend for performing in an independent film (I did not receive a 1099 for that $$100.00).
This year the $1000.00 from a losing IRA with State Farm was received in Jan. '11. I put $2000.00 in that IRA in 1998, I did not ever deduct it as an IRA Tax Contribution for any year and it has never reached a $2000.00 value from the day I invested it in 1998. My only other source of income is my SS Disability although I may now be classified as "Retired" by the government due to my age even though I have not requested so.
I apologize for not getting back to you right away, but experts are not online 24 hours a day. Since there was no response from you within 20 minutes, I logged off, and am now checking responses.
There is no reason for you to be in the dark, I would like to help you as much as possible to understand the answers.
#1. Social security disability will not enable you to get EIC. A $100 stipend for work performed would enable you to receive $10 of Earned Income Credit. However, the cost for preparing the return would exceed this unless you prepared the return yourself. Forms and instructions can be found at www.irs.gov under prior year, 2010. The return would need to be mailed in. Since you did not get a 1099 for the $100, the IRS may deny the earned income credit and ask for proof of payment of the $100.
#2. If you never deducted the $2000 you put into the IRA, and you have no other IRAs, then you do have a $1000 loss. However, if your only income is SS disability, then the $1000 loss will not be of any benefit to you, since you have no taxable income.
Please feel free to ask followup questions, just understand that experts are not online every moment of the day. I am retiring for the evening and will check back in the AM.
I am so sorry for being harsh, I have been trying to get an answer on hold with IRS since 8:00 am. IRS has transferred me back and forth through several departments and all have been automated except for 2 humans who initiated another round-about.
IRS on-line eventually sent me to your service under "FREE Questions Answered" after many attemps to find the answers at the IRS sight where I could not find "disability" nor "IRA" through "search".