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Whats happening here is called a QDRO (pronounced KWADRO)
Qualified Domestic Relations Order
Once it's moved to the IRA
it will be asx if youve had the IRA all along
It will only be when you pull the money OUT that there will be taxation ... this is dons so that the person giving up the money isn't forced to pay tax on something that's going away AND to motivate the person that gets it to keep it AS a retirement account
I get that. He is trying to save himself (I won't go there.LOL). What type of retirement account should I move it to so that when I pull it out I am not hit super hard by the tax penality? I know I will suffer the tax penality but I am not sure which type of account will help me get as much as I can.
OK ... if it's a QUADRO, it HAS to be an IRA
That's really the only way most jusges will do it
Any money you distribute from this IRA will be added to your taxable income (and if you're under 59 an 1/2/ there will be an additional 10% tax penalty) ... so what you MAY want to do is pull some out this year and some out next (maybe just enough that it doesn't put you in a highr tax bracket for that year.
My dilema is that I need to have access to $59K for settlement on my refi. To qualify for the refi I have to settle all of the outstanding marital debt. So If I pull out $59K I will have to use the rest for the tax penality I am assuming. Or do I pull it out and then have to write a check? Do I settle the taxes duirng tax season or at the time of withdrawal. This is bad huh?
so, lets say you pull 20,000 this year and have 30,000 of Wages or other income ... You really made $50,000 for tax purposes
sorry we crossed there .. let me read your post
I have a base salary of $94K, I pull out the funds from an IRA at $65K which means I now make $159K. I declare two kids. I am in seriously tax debt huh?
ok sorry lost the connection there for a minute
let me run the numbers for you
You get to claim the kids?
also do you itemize? (mortgage interest, property taxes, car tage and title, etc)?
Yes, he doesn't know that yet but he has not paid child support all year and I have full physical custody and he has partial physical custody. He has been paying the house payment so he gets to claim that which totally stinks for me. From what I understand now, I can get a basic IRA. Roll his funds over. Take the money out. Do I pay the 10% right then or later? I will itemize. This will be the first year I do my taxes on my own.
k ... you won't pay (you CAN have the taxes withheld) until next year in april .. it works just like your W-2 ... if you have them withheld now (or even a part of what you'll owe) it offsets what you have to pay at tax time
So say I take the whole 65K, I can take 6500 of that, put it away and pay the taxes in April?
Hre are te tax bracket (but nremember this is TAXABLE income You get to take off three exemption n(you and the kids) that's 3,900 x 3 ... plus the itemized or standard deduction
For a single filer
taxable income from $0 to $8,925,
taxable income over $8,925 to $36,250
taxable income over $36,250 to $87,850
on taxable income over $87,850 to $183,250
on taxable income over $183,250 to $398,350
on taxable income over $398,350 to $400,000
on taxable income over $400,000
ON your questions? that's right ... or MORE .. OR less
So lets say you take 65000
So I get taxed 10% of the total I take out and then 28% of my total income? This all happens in April?
Hang with me here... we're very close
95 + 65 = = 160 BUT
we subtract 3900 x 3 (exemptions for you and the kids) and we subtract at least the standard deduction of 6100 for a single filer
so so we're at 142
So taking all of it will add (at 28%) 18200 in taxes PLUS the 6500 penalty for being under 59 and 1/2 =24700
SOrry ... but it's better to have all the fact... (help you see around some corners)
No, you can offset what you'll owe i April by having some mwithheld ... withholding a little more at work, etc
sorry for all the typos NOW, you can ... having some "withheld"
I have been withholding at a higher single rate with three exemptions.
anything you withhold out nof the distribution OR against other income through your W4 will offset what you owe
Again, if you can give me thw withholding amount I can annualize it, put it in a little mode here and do a quick projection]
I have to go to a meeting but this was very helpful. So from what I get, I need to put it in a traditional IRA. I will be taxed for everything in April. I can ask to have the remaining amount withheld for tax purposes and I can increase what I am with holding in my paycheck and that will off set what I owe.
Yes, and again it's only pulling it OUT, distributing it from the IRA that causes the taxation ... if it's being done as a qdro the going INTO an IRA will be essentially automatic, they should give you directions or your atty will have you open the IRA for this purpose
But yes, you have it
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you're very welcome
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.. be glad to run the numbers for you.
Regardless, thanks again,