Regular IRA Distribution Before 59 1/2


L

Larry

I resigned from a federal civil service job early in
February 2003 at the age of 38.

In July 2003, I withdrew $20,000 from a regular IRA to help
pay my bills and health insurance.

Recently I was approved for an early retirement from the
federal government due to disability which will backdate to
February 2003.

I will now get reimbursed for my health insurance payments
and receive backpay for salary.

I have not been approved by Social Security to date for
total disability. I was approved for a mental health
disability which prevents me from continuing in my federal
job.

Is it too late for me to restore the $20,000 to my regular
IRA ?

If not, will I have to pay the 10% penalty and federal
income tax on the $20K ?

How do I determine if I am eligible for the disability
exemption for the 10% penalty ? Do I have to send a
physician's note to the IRX ?

Thanks,

Larry
 
Ad

Advertisements

J

John H. Fisher

Larry said:
I resigned from a federal civil service job early in
February 2003 at the age of 38.

In July 2003, I withdrew $20,000 from a regular IRA to help
pay my bills and health insurance.

Recently I was approved for an early retirement from the
federal government due to disability which will backdate to
February 2003.

I will now get reimbursed for my health insurance payments
and receive backpay for salary.

I have not been approved by Social Security to date for
total disability. I was approved for a mental health
disability which prevents me from continuing in my federal
job.

Is it too late for me to restore the $20,000 to my regular
IRA ?

If not, will I have to pay the 10% penalty and federal
income tax on the $20K ?

How do I determine if I am eligible for the disability
exemption for the 10% penalty ? Do I have to send a
physician's note to the IRX ?
You had only 60 days to put the money back into an IRA.
Although it's too late to restore the $20K to your IRA, you
should escape the penalty based on your disability. Just
complete Form 5329, using exception #3, and submit it with
your tax return. Sadly, you'll have to pay tax on the $20K
but at least you'll get a little break in not having to pay
the penalty.

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
 
A

A.G. Kalman

You had only 60 days to put the money back into an IRA.
Although it's too late to restore the $20K to your IRA, you
should escape the penalty based on your disability. Just
complete Form 5329, using exception #3, and submit it with
your tax return. Sadly, you'll have to pay tax on the $20K
but at least you'll get a little break in not having to pay
the penalty.
Whether or not this taxpayer can use the "disability"
exemption from the early withdrawal additional tax is a
matter of fact. The taxpayer has not provided any facts
regarding his disability. Therefore, it is not possible to
conclude that the taxpayer meets the exception. The IRA
exception requires a disability that prevents "substantial
gainful activity" and certification from a physician.
 
Ad

Advertisements

A

A.G. Kalman

You had only 60 days to put the money back into an IRA.
Although it's too late to restore the $20K to your IRA, you
should escape the penalty based on your disability. Just
complete Form 5329, using exception #3, and submit it with
your tax return. Sadly, you'll have to pay tax on the $20K
but at least you'll get a little break in not having to pay
the penalty.

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
Whether or not this taxpayer can use the "disability"
exemption from the early withdrawal additional tax is a
matter of fact. The taxpayer has not provided any facts
regarding his disability. Therefore, it is not possible to
conclude that the taxpayer meets the exception. The IRA
exception requires a disability that prevents "substantial
gainful activity" and certification from a physician.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top