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At age 74, how to get cash from my IRA - "The Hartford"

At age 74, how to...
At age 74, how to get cash from my IRA - "The Hartford" variable rate annuity worth $581,000 ?
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Customer reply replied 4 months ago
No mortgage, no auto loans, over 1.2 million in stocks, and cash flow from rental houses in WashDC suburbs. Wish to remodel my home and purchase non-vital stuff in next few weeks. Want at least $175,000 right away.
Have NOT ever made any withdrawals from this TRADITIONAL IRA originally valued at $203,000 in 1998
Customer reply replied 4 months ago
Will the company, The Hartford, wihhold anything for taxes ? or just wait til next year to let IRS take 33% ?
Answered in 12 minutes by:
1/22/2018
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,030
Experience: Former IRS Revenue Agent
Verified

Dear Customer,

1) If it is an IRA account, you should have started to withdraw the required minimum distribution the year after when you turned 70.5 and the years afterwards. It is possible that you have withdrawn your minimum distribution from all resources total and not from every single one.

2) No matter what we discuss here, would you please make sure you retain a local CPA to discuss further before you withdraw. The size of the annuity is too large for you to trust a communication with me here. There are many factors involved especially in an annuity.

3) It is advised that you withdraw required minimum distribution from this account.

4) Get the 175,000 from your stock investment if you don't have enough in other savings or checking accounts or CDs. Long term capital gain has the lowest tax rate.

5) Don't let the IRS to take any -- or at least the least possible.

6) Please find out and verify whether this annuity account is traditional IRA account or not. If it is, you should have counted your minimum distribution years ago. Then, please make sure that the required minimum distributions have been taken out correctly through out the years past and in the years to come.

Please feel free to follow up.

Regards,

Fiona

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Customer reply replied 4 months ago
This is NOT Roth, but a traditional IRA. Zero withdrawals so far.
OK ( groan...) I will seek out a CPA.
Does the financial institution ( The Hartford, Lexington, KY ) actually do any withholding ? or does the
IRS expect me to report next year and then I'm subjected to at least 33% tax on all distributions ( plus any penalties for being "late") ?

Dear Customer,

The required minimum distribution is taxed at regular tax rate. Therefore, if your regular highest tax rate is 33%, withdrawing from this regular IRA account will be taxed at that rate.

Therefore, it is more tax beneficial to use the investment account money in addition to the required minimum distribution to make up the need of 175,000. The Hartford will and should withhold income tax on this distribution from the annuity.

If you have any penalty for not withdrawing from the regular IRA account, you may want to take the following steps.

1) To calculate your withdrawal from all your retirement account (not pension but IRAs) back to the year after you turned 70.5. We want to make sure that you had short, i.e., insufficient required minimum distribution.

2) To handle the insufficient required minimum distribution, first, you work with Hartford to withdraw and make up the difference as soon as possible now in 2018.

3) Then, when you prepare your 2017 tax return, you use Form 5329 to request for penalty abatement using Part IX. I have used this part to file penalty abatement for each year past using Form 1040X attaching this form. Do not fill out the penalty. Use the Form to request penalty abatement. Your return perparaer should know how to do it. Try not to file this form by itself. File it with each year's tax return.

In a way, it is not penalty abatement, it is to request the IRS not to assert tax. You want to say your reasonable cause which could be your financial institution never reminded you, health reason, etc.

4) It is suggested that you do not volunteer to pay that 50% excise tax.

The IRS usually is willing not to respond. That is, without responding to this return or they inform us the amended return is accepted without any tax adjustment. That means they already agree to not to penalize us. Usually, they will consider especially once we realize the short withdrawal, we already immediately withdrew, they will forgive the penalty.

Please feel free to follow up.

Regards,

Fiona

Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,030
Experience: Former IRS Revenue Agent
Verified
Dr. Fiona Chen and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
Thank you very much.
I have rated you 5 stars and added a bonus.

Dear Customer,

You are welcome and you are so kind.

Thank you.

Regards,

Fiona

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Dr. Fiona Chen
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,030
1,030 Satisfied Customers
Experience: Former IRS Revenue Agent

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