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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22838
Experience:  Taxes, Immigration, Labor Relations
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I wanted to convert a traditional ira account to a standard

Resolved Question:

I wanted to convert a traditional ira account to a standard account. I know that I'll be taxed at the standard rate and have 10% withdrawal penalty since I'm under 59.5. Is there a site you know of which might help me determine what the tax will be if I did this? My issue is that I'm not able to short stock with my IRA right now since I cannot have leverage and I'd like to in a seemingly endless down market. If I'm willing to take the hit right now, what should I do to calculate the tax?
Submitted: 2 years ago.
Category: Tax
Expert:  Lev replied 2 years ago.

LEV :

Hi and welcome to Just Answer!

LEV :

I will help you to estimate your tax liability if needed.
What we need to know - your total income, expected amount of distribution, filing status, deductions.

LEV :

Any other related information? Dependents? allowable tax credits, etc?

Customer:

Ok, let me grab that info, one moment...

LEV :

You may do estimation on your own if you want - here is the website you may use - http://hrblock.com/free-tax-tips-calculators/tax-estimator.html

Customer:

Ok, so this is a hard one to answer since I was laid off in Sept. 2011... My wife works and makes $79k I was working at MSFT and make around $120K. I'm still looking for a job and hope to have one in the next month or two for about the same salary range. Is there some way to estimate this?

Customer:

Dependency would be 1

LEV :

what is your expecting distrinbution from IRA?

Customer:

The expected amount (assuming it would be all) would be around $130k before any taxes

Customer:

I'm open to doing just part but I need to know where the threshold would be for me before I entered another tax bracket. I know that since I cannot say for certain what my income would be, this is hard; which is why I'm asking online here ;)

Customer:

sorry, the expected distribution (if the entire account was converted) would be $130k

Customer:

as I mention, I'd be open to just doing part if that would be a better choice

Customer:

One other thing to mention, is that I did take a distribution from my IRA already in 2012. I took $30k and withheld 30% from that amount for taxes.

LEV :

Your estimated tax liability WITHOUT distribution - assuming standard deduction, filing jointly, 1 dependent child - ~$37,000.
With ADDITIONAL taxable distribution $130,000 - your estimated taxable income will be $80,000 plus 10% penalty $13,000.
That means - your ADDITIONAL tax liability - specifically for $130,000 distribution - is estimated as $56,000.

LEV :

State income taxes will be extra.

LEV :

Considering your high income tax bracket _ I might suggest trying to avoid distribution.

Customer:

Ok, thanks that's what I wanted to know.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22838
Experience: Taxes, Immigration, Labor Relations
Lev and 5 other Tax Specialists are ready to help you

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