IRA Rules

Posts Tagged ‘ira distribution rules 2010’

Question: IRA Minimum Distribution Rules?

If somebody withdraws their stock dividends in their IRA does that count toward the Minimum IRA Distribution rule?

Answer: Yes. All dividends, interest and invested funds are equal in the eyes if the IRS (they all are taxed as ordinary income when withdrawn).

Part 7: Inherited IRA and 5 year rule for distributions.

Question: Is an IRA distribution considered “investment income” as defined under Earned Income Tax Credit rules ?

To qualify for the earned income tax credit, your “investment income” must be below a certain amount. Is an IRA distribution considered to be part of this “investment income” ??
$ so fresh – you didn’t answer my specific question.
$so fresh – thanks for the new information.. you have now answered my question.
vb – thanks for your excellent and very helpful answer.

Answer: On 1040a, an IRA distribution is shown on line 11 *and* line in the agi on line 21.

In the 1040a instructions, the investment income worksheet specifically skips line 11.

However, the calculation of the EIC takes the agi into account, so a large amount of IRA money can lower the EIC (it would never raise it).

Retirement Planning : How Do IRA Distributions Work?

Question: How do you resolve a bank tax reporting error for a qualified distribution from a Roth IRA?

I took a qualified early Roth IRA distribution as a first time homebuyer in 2006. What happens if my bank incorrectly codes this transaction as non-qualified? Will the IRS understand what actually happened?

Answer: The bank will assume you made a distribution from your Roth IRA period. It is up to you to justify to the irs that it is not taxable. You do this by filing the proper forms with your tax return (attached to it)

5329 This tells the IRS that you are or are not subject to the 10% early withdrawal penalty because you are under 59 1/2 or why you are exempt if you are a first time home buyer taking out up to $10,000

8606 (page 2, part III lines 19-25) This tells the IRS how much of the distribution is basis reduction and how much is taxable income.

Do not forget on a roth, you get your basis back then you have taxable income, unless you contributed the funds in the last 5 years. First time home buys can take $10,000 off

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