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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10110
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a 57 yr old man ; at home taking care of my disabled

Customer Question

Good afternoon sir , I am a 57 yr old man ; at home taking care of my disabled wife ... since her devastating (2)brain aneurism surgeries and cervical (neck) surgery which required the removal of two vertabra ... bot***** *****ne is she is in cronic pain and does not want me to leave her and go back to work . I have been out of work since 2/10/15 when I was hit with documents prepared by my former LLC partner declaring resignation from our company for the sale sum of 1$ ..... I have an excellent credit score and have been doing minimum payments on my credit card debts by selling off personal items since feb. 10th . I am now considering pulling 15000.00 out of my IRA to pay off my creditors , How much of a tax beating can I expect ? At last the total in my IRA is sixty something thousand
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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I hold J.D. (Duris Doctorate -a Doctoral degree in the law), MBA (Finance & Tax specialization), a BBA from Mercer University's Stetson School of Business & Economics, as well as CFP and CRPS (Chartered Retirement Plans Specialist) designations

I can help here

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First, I'm so sorry to hear of your difficulties. I lost a brother in law to a brain aneurism, a young man leaving a wife and small child. ... It's hard to imagine what you must be going through.

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On the IRA, the amount you pull is simply added to any other household income for the tax yer and taxed at whatever bracket that, plus any other income, puts you in.

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Then, becasue you are under age 59and 1/2, there's the 10% additonal tax for early withdrawal

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If this is your ONLY income for the year, then the tax would look something like this. (bear with me just a moment while I run the numbers)

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Expert:  Lane replied 1 year ago.

Summary Table

Estimated Tax Analysis

Gross income$15,000

Qualified plan contributions-$0

Adjusted gross income=$15,000

Standard/Itemized deductions-$12,600

Personal exemptions-$8,000

Taxable income=$0

Tax liability before credits$0

Child tax credits-$0

Estimated tax liability = $0

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As you can see here, if this is your ONLY income, the 15,000 is not enough to take you above the standard deductin and the personal exemptions that you both get

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There would, however, still be the 10% penalty tax ... 15,000 x .1 = $1500

Expert:  Lane replied 1 year ago.

There IS on possibility of some relief on that penalty tax

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If you take early IRA distributions in order to meet medical insurance premiums for family coverage, no 10% penalty is applied on those distributions as long as the following conditions are met:

  • You lost your job
  • You received unemployment compensation for 12 consecutive weeks because of losing his/her job
  • You received the IRA distribution either in the year of the unemployment compensation or the following year
Expert:  Lane replied 1 year ago.

Please let me know if you have any questons at all

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and if you do have other taxable income for the year and would like to estimate that for me I can run the numbers again

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But, again, if the 15,000 is the taxable income for this tax year, that would not put you above the standard deduction and exemptons for married filing joinly and the 10% tax would be the only tax (UNLESS you meet the requirements for the waiver of the 10% penalty, as described above)

Expert:  Lane replied 1 year ago.

Hope this has helped

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If this HAS helped, and you If you don't have additional questions on this, I'd appreciate a positive rating (by clicking the stars on your screen) ... that's the only way I'll be credited with a portion of what you've paid JustAnswer.
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Lane

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