Effect of drawing from different IRA
L1: Effect of drawing from different IRAMy wife’s business is in trouble, and she wishes to withdraw funds from her Roth IRA to sustain her business. I have an IRA (different account) which I have have setup as a SEP (72t). We file a joint tax return.
My question is, will her withdrawal from her account have an effect on my plan. Will it bust?2012-06-26 15:21, By: dpantle, IP: [188.8.131.52]
L2: Effect of drawing from different IRAAll retirement accounts are unique to the taxpayer himself. There are no joint retirement accounts. Transactions involving one spouse have no affect on the other spouse ( other than non-working spousal contributions).
Withdrawals from ROTH IRAs have special rules. If her ROTH IRA is from CONTRIBUTIONS, the the “5-year rule” means that the withdrawal of any earnings (i.e. above the contributions) are taxable only if withdrawn within 5 years of the first day of the year FOR WHICH the first contribution was made ( i.e. if she contributed $ 100 in 1990 to a ROTH IRA, then all distributions would be tax free, but if she started her ROTH IRA in April 2010 for 2009, then these earnings would be taxable).
However, if the ROTH IRA was established by a ROTH CONVERSION, then each year’s conversiosn have a different “5-year rule” for distributions within 60 months of EACH CONVERSION. Further, if she made a 2010 ROTH CONVERSION to be included in taxable income in 2011 (50%) and 2012 (50%), there was an “acceleration clause” that any distribution in 2011 would make the entire CONVERSION taxable in 2011, but that is moot now that we are in 2012.
As far as you question, her transactions will have no effect on your plan.
But have her check with her tax practitioner before proceeding with her plan to withdraw funds from her ROTH IRA.2012-06-26 16:30, By: dlzallestaxes, IP: [184.108.40.206]