IRA Rules

Posts Tagged ‘tax-free-rollover’

Question: Traditinoal IRA First-time home buyer tax treatment?

Hi,

My wife and I are looking to purchase our first home in the next couple of months and want to clarify this questions before ‘game day’.

I understand the surface rules of the IRS Traditional IRA penalty waiver for First-Time home buyers. The IRS basically allows a $10,000 distribution penalty free for the purchase of your first home.

The question I have goes a little deeper and doesn’t seem to be covered on the IRS’s website:
If I am the only one (between my spouse and I) who owns a Traditional IRA, AM I ABLE TO TAKE OUT $10,000 FOR THE BOTH OF US OUT OF MY IRA?

The IRS’s website states:
“If both you and your spouse are first-time home buyers, each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.”
What if she doesn’t have an IRA, and we are utilizing my IRA…would I be able to pull $20,000 for the both of us out of MY IRA?

Thank you in advance for any help.

Answer: You would each have to have IRA’s to be able to take out $10,000 for each of you. So you would only be able to take $10,000 out of your IRA for the first-time home buyers without the 10% penalty.

Laura H – H&R Block – Senior Tax Advisor 5
**This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.

2010 Tax Law Changes with financial retirement expert, Bill Smith!

Question: How do calculate 10% excise tax on IRA withdrawl?

I think i have failed to pay the early withdrawl 10% tax on my 72T for some past years.

Say I had $100,000. in my IRA and was supposed to take 4%
a year over 12 months until age 591/2.

I did take some additional withdrawls. My question is this.
Is the 10% tax on the additional withdrawls or 10% of $100,000? Sorry if I am confusing you. there are so many rules confusing me.
I have already paid the state tax and regular income tax on the withdrawls. I just faild on the 10%
Honestly,, I became aware of the problem when i got sober. I was lying to myself and the IRS.
The IRS did not call it to my attention.
My CPA mentioned it.
I a bit freaked-out. I need to be honest to stay sober. I will owe over 100K

Answer: From my understanding and experience of this issue the IRS may attempt to assess 10% on all of the entire withdrawal since the additional withdrawal has violated the 72(t) exception. There is some question if they (the IRS) have the ability to catch the problem absent any other reason for them to have looked at the return. Therefore the best approach to this question may come from an understanding of how the problem came to your attention.

For the returns to have been filed correctly in the first place the preparer would have included a IRS Form 5329 and excluded the 72(t) portion on line 2 of that form and assess a 10% penalty on the remainder. If you wish to be correct you should file an amendment (1040X) to include the corrected IRS form 5329. But again the means by which you became aware of this oversight may dictate another answer.

Roth IRA: The New Rules (Part 2 of 2)