Although tax season is over, tax questions arise year round. Mr. MomonDealz is an experienced accountant and will be answering questions sent to him at firstname.lastname@example.org with the subject line “Ask an Accountant”. Question:
I am considering taking an early withdrawal from the Rollover IRA account ($13k out). I recently had surgery and this is needed to clear bills, debt and get the budget back. I know I am looking at a 10% hit on the taxes next year for a penalty ($1,300), but what else am I looking at? How much else should I expect ?
You should be aware there are provisions that exempt you from the 10% penalty. One of them being unreimbursed medical expenses in excess of 7.5% of your AGI (meaning if you have enough medical expenses to get a deduction on Schedule A, then you can avoid the 10% penalty). There are no other caveats except if the IRA is less than 5 years old, you will not qualify for the exception. You should expect the $13K to be added to income (taxed at your income tax rate for the year of the distribution) No additional “tax traps”
*Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.