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Dave CPA
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If age 53 to 55 and disabled, can person withdraw funds from

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If age 53 to 55 and disabled, can person withdraw funds from a 401k and a defined benefit plan and avoid the early withdrawal penalty since they are not 59.5. Or will they still be hit with the pre 59.5 penalty for early withdrawal?
Submitted: 1 year ago.
Category: Tax
Expert:  Dave CPA replied 1 year ago.

Hello,

 

Welcome to Just Answer,

 

I'm sorry to hear about your situation. There are certain exceptions to this additional tax, and distributions made because you are totally and permanently disabled is one of them.

 

Below is a link with more information provided by the IRS.

 

http://www.irs.gov/taxtopics/tc558.html

 

Please let me know if you have any question before you rate my answer. A positive rating is what I strive for. I wish you the best.

 

Customer: replied 1 year ago.


Dave;


From what I see in this IRS material you sent, a distribution due to disability will be exempt from the early tax penalty assuming it is a total and permanent disability. Person is dying with cancer (maybe has another 4 to 5 months), but still officially employed. Using sick leave and vacation time to stay employed as long as possible.


 


Given this information would I be correct in assuming a withdrawal now would not meet the total and permanent diabiliity statement for excejption

Expert:  Dave CPA replied 1 year ago.

I'm really sorry to hear this. The definition of disabled per the IRS is below:

 

You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.

 

If this person is still employed then they person would not meet the definition. In the link there is also an exception to pay for medical expenses. That might be the better route to go, but if you can get a notice from the doctor of disability, you should qualify after employment terminates.

 

Please let me know if you need anything else.

Dave CPA, Accountant
Category: Tax
Satisfied Customers: 840
Experience: Vast knowledge within the accounting/tax industry
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