Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

After 27 straight years of employment I am now without a job…

Customer Question
After 27 straight years of...
After 27 straight years of employment I am now without a job going on 6 months. I need to cash in my 401k and IRA in order to pay bills.
I'm 50 years old and I was in the 30% tax bracket. My wife has Lupus and it's getting more difficult to work as a nurse as she's required to be on her feet most of the time.
My question is: Is there any relief from the IRS penalty that I can site when withdrawing my 401k?
Submitted: 2 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 8 minutes by:
6/9/2015
Tax Professional: Lev, Tax Advisor replied 2 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,860
Experience: Taxes, Immigration, Labor Relations
Verified
Hi and welcome to our site!Sorry for your situation...There are several exclusions from the penalty.Please be aware that distribution still will be included into taxable income.Please be aware that exclusions might be different for IRA distributions and 401k distributions.The following six exceptions apply to distributions from any qualified retirement plan: Distributions made to your beneficiary or estate on or after your death. Distributions made because you are totally and permanently disabled. Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply. Distributions to the extent you have deductible medical expenses that exceed 10% of your adjusted gross income (7.5% if you or your spouse is age 65 or over) whether or not you itemize your deductions for the year. The 7.5% limitation is a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. Distributions made due to an IRS levy of the plan under section 6331. Distributions that are qualified reservist distributions. Generally, these are distributions made to individuals called to active duty for at least 180 days after September 11, 2001.The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50. Distributions made to an alternate payee under a qualified domestic relations order, and Distributions of dividends from employee stock ownership plans.
Ask Your Own Tax Question
Customer reply replied 2 years ago
Is the IRS penalty less for an IRA withdraw versus a 401k withdraw?
Tax Professional: Lev, Tax Advisor replied 2 years ago
To discourage the use of retirement funds for purposes other than retirement, the law imposes a 10% additional tax on early distributions.
That is so-called "early distribution penalty."
That 10% additional tax applies to both 401k and IRA distributions unless an exception applies.
For your situation - it is possible to start distributions as a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (your spouse) - that will allow to avoid that early distribution penalty.
You may view that distribution as starting your retirement before 59 1/2.
Payments are substantially equal periodic payments if they are made in accordance with one of the following methods.
-- Required minimum distribution method. Under this method, the resulting annual payment is redetermined for each year.
-- Fixed amortization method. Under this method, the resulting annual payment is determined once for the first distribution year and remains the same amount for each succeeding year.
-- Fixed annuitization method. Under this method, the resulting annual payment is determined once for the first distribution year and remains the same amount for each succeeding year.
For information on these methods, see Revenue Ruling 2002-62, which is on page 710 of Internal Revenue Bulletin 2002-42 at
www.irs.gov/pub/irs-irbs/irb02-42.pdf
.
Ask Your Own Tax Question
Was this answer helpful?
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,860
32,860 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,495 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,272 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
VA form asks for adjusted gross income (disability form). We
VA form asks for adjusted gross income (disability form). We file joint; can we separate his income from mine for the form? How? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Are medical expenses for mental health/therapist tax
Are medical expenses for mental health/therapist tax deductible? What yearly cost do you have to meet for this to be deductible?… read more
Carter McBride
Carter McBride
LLM
1,077 satisfied customers
Is there a donation amount limit for tax deduction when you
Is there a donation amount limit for tax deduction when you donate money to missionary organization?… read more
Mark Anderson
Mark Anderson
Attorney
Doctoral Degree
10 satisfied customers
Are there any limits for deducting mileage for volunteerism
Are there any limits for deducting mileage for volunteerism (for example, volunteering for something associated with your employer but for which no compensation was received)… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,129 satisfied customers
Self employed. after deductions, my taxable income is $4000.
self employed . after deductions, my taxable income is $4000. will i have to pay tax on that amount? thank you … read more
Cole Parker
Cole Parker
Principal/CPA
Bachelor\u0027s Degree
108 satisfied customers
Adjusted gross income of 79084, single, over 65. How much is
adjusted gross income of 79084, single, over 65. How much is my tax … read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,129 satisfied customers
For 2018, what is the income limit to be able to deduct
for 2018, what is the income limit to be able to deduct rental losses … read more
Lev
Lev
Tax Advisor
32,860 satisfied customers
I have Adjusted Gross Income of 4332., I had kind of a lean
I have Adjusted Gross Income of 4332. , I had kind of a lean year with me using some savings, I do not have a record of how much. It takes about 10,000 to help me through a year like this I do not kno… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,129 satisfied customers
I am wondering if certain medical expenses are deductible
Hello, I am wondering if certain medical expenses are deductible such as mileage to a pharmacy to pick up a prescription medication. Also, Icy Hot recommended by a doctor for pain due to Lyme disease.… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,129 satisfied customers
My adjusted gross income is $13,539. $8560 from a pension
My adjusted gross income is $13,539. $8560 from a pension from my ex-husband, $14204 from SS and $4706 from a bank I retired from which I will no longer be receiving. Do I need to pay taxes on my Soc … read more
Lev
Lev
Tax Advisor
32,860 satisfied customers
Are medical expenses paid for with tax deferred HSA money
Are medical expenses paid for with tax deferred HSA money eligible to be claimed on Federal Schedule A?… read more
Carter McBride
Carter McBride
LLM
1,077 satisfied customers
NYC tax question: An individual can deduct unincorporated
NYC tax question:An individual can deduct unincorporated business tax they pay on their personal return. Can corporate taxes they pay if they own an S Corp and pay NYC corporate tax also be deducted o… read more
Lev
Lev
Tax Advisor
32,860 satisfied customers
I'm retired, about 24,000, adjusted gross income for 2017. I
I'm retired, about 24,000, adjusted gross income for 2017. I am going to sell my owner occupied duplex that I've had for 29 years. I rented half for a few years, but haven't rented it in over 10 years… read more
Carter McBride
Carter McBride
LLM
1,077 satisfied customers
20% tax deduction for pass through entities is limited for
Hi there. 20% tax deduction for pass through entities is limited for service providers like doctors. My question is: An S-Corporation provide medical billing services like sending claim, collecting mo… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,244 satisfied customers
As per the new tax law, the property tax deductions of 10000
As per the new tax law, the property tax deductions of 10000 is it per property or per tax payer per property?If both wife and husband file together can they claim 20000 towards one property or just 1… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Are non insurance covered medical expenses deductible? Are
are non insurance covered medical expenses deductible? … read more
abci168
abci168
Principal
27 satisfied customers
The 2018 tax law will allow homeowners to deduct property
The 2018 tax law will allow homeowners to deduct property taxes and either income or sales taxes with a combined limit on these deductions being limited to no more than $10,000. What does this mean? w… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,272 satisfied customers
Is the deduction for medical expenses on Schedule A repealed
Is the deduction for medical expenses on Schedule A repealed under the new tax law & can health insurance premiums for a Schedule C proprietor still be deducted on page 1 of Form 1040?… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,272 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x