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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1408
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Hello, I am a 58 year old male who is getting a legal separation

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I am a 58 year old male who is getting a legal separation from my wife of 10 years. She is 59.

As part of our legal separation agreement, I will liquadate a large part of my IRAs ($250K) and transfer them to my wife. The plan is to also give her a lot of our combined debt ($155K). She will use the funds to eradicate the debt.

My understanding is that as soon as the legal separation is granted, I can transfer the IRA funds to her without incurring a 10% penalty.

She is a nurse who earns about $75K per year. I will keep our house. I believe that she can still claim her son as a dependent since he is 23 and is supported by her (us).

I need to estimate my wife's tax burden for 2011 since we will no longer be married before the end of the year (we will be legally separated).

It is my understanding that we can not file jointly. Can we each file as head of household?

Also since the bulk of the money is going to pay bills, is there any tax break that my wife can claim?
Submitted: 6 years ago.
Category: Tax
Expert:  Jax Tax replied 6 years ago.

Jax Tax : First lets start with the IRA. You are not cashing it out. If you do, you will pay the 10% penalty and tax on the entire withdrawal. She will not pay any tax. What is likely the situation is that the IRA is being split and put in her name. No tax, no penalty but it would be an IRA in her name. If she cashes it out prior to 59 1/2 she will pay tax and penalty. If after, only the tax.
Jax Tax : Her son. Unless he makes less than $3700 in 2011 or is permanently disabled, he cannot be claimed as a dependent.
Jax Tax : Third, unless you have a dependent, you file Single not head of household. You must have at least one dependent to file head of household.
Jax Tax : The combined debt will have no bearing on tax unless.we are.talking about mortgage.interest which can be expenses by the person paying it.

My wife's son earns less then $3700. He is a student. The same is true for my son. I assume that we both can then file as head of household.


Also how much would the tax be for her (regardless of the penalty) if she cashed out.


I'm still here.


Sorry I'm new at live chat.

Jax Tax : It depends on her tax bracket. Add earnings to withdrawal and subtract 10k. Then look at the tax bracket chart here.


Jax Tax and other Tax Specialists are ready to help you
Expert:  Jax Tax replied 6 years ago.
Let me know if you need additional help.