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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 13196
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I am totally and permenantly disabled per Sovial Security,

Resolved Question:

I am totally and permenantly disabled per Sovial Security, and have been since Dec. 2000.

Now for tax year 2012. My question is that my wife took an early distribution of her 403b account last year, used for necessary substantial medical payments and fixes for the house. Out of any of this, is there a way I can avoid 10% penalty? We file jointly and have for years. I was the secondary beneficiary of her retirement account.
Submitted: 10 months ago.
Category: Tax
Expert:  Megan C replied 10 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

There is one way to get a penalty free withdrawal on the amount of funds that were used to pay medical expenses above 7.5% of your AGI

Megan C :

However, the amount that is taken to pay for home expenses, etc are not subject to the penalty abatement.

Megan C :

How the medical expense allowance works is that if your medical expenses exceed 7.5% of your AGI then you can deduct that amount above that limit. For example, if your AGI is $100,000 and you had $10,000 of medical expenses then you could take a penalty free withdrawal on $2,500 of that.

Megan C :

That's the amount that your expenses exceed 7.5% of your AGI.

Megan C :

Also, you can avoid the penalty if you are over 59.5, or if you take substantially equal periodic payments.

Megan C :

You can read about 9 penalty free withdrawals, HERE

Megan C :

Please let me know if you have any further questions.

Megan C :

If you have no further questions, please feel free to rate my response as "excellent" so that I may receive credit for assisting you today

Expert:  Megan C replied 10 months ago.
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Expert:  Megan C replied 10 months ago.

Hello, Dean...I see where you had trouble joining our live chat. If you would, please review the response. If you need further clarifications, please reply below. If not, please rate as 'excellent' so that I may receive credit for assisting you today. Thanks again for being a valued JustAnswer.com customer.

 

Another great resource to read about this answer can be found, HERE

Customer: replied 10 months ago.
As i mentioned in original question, The other aspect was that I am permanently and totally disabled by the strictest standard, as per Social Security, beginning over a decade or so.

My wife and I file jointly. So as i asked above, can we claim exemption from the extra 10% penalty on the basis of permanent disability of one of us, me.

Thanks again.

Dean
Expert:  Megan C replied 10 months ago.
Dean,

The total and permanent disability exception would only apply to your wife, who is taking the distribution from her account. It would only count for you if you were taking your own retirement out. She can't use the disability exception for you with her funds.

I'm truly sorry if this is not the news you had hoped to hear. Please let me know if I can be of any further assistance. If not, please rate as "excellent" so that I may receive credit for assisting you today.

Thanks!
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 13196
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 4 other Tax Specialists are ready to help you

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