Medical withdrawal after 72T
L1: Medical withdrawal after 72TOnce I start a 72T (which I did last year), can I still take the medical exemption and withdraw the money I need to pay for medical bills (over the 7.5%) I need for my family? or will that be considered ‘breaking the 72T’?Thanks2009-10-18 14:57, By: Richie Rich, IP: [188.8.131.52]
L2: Medical withdrawal after 72TPrior to Benz v Internal Revenue Service 132 TC 15 the general response would be that the only two exceptions would be death or disability. After the Benz case, additional withdrawals that meet other exceptions should be allowed.
With that said, the IRS may (or may not) be looking for another test case. If other options are available, start with the other options.
Click HERE for a summary of Benz v IRS2009-10-18 15:32, By: Gfw, IP: [184.108.40.206]
L3: Medical withdrawal after 72TThanks, I guess I don’t want to be another example for the IRS.2009-10-18 15:42, By: Richie Rich, IP: [220.127.116.11]
L4: Medical withdrawal after 72TYou should consider your tax situation. ALL withdrawals from your IRAs ( SEPP 72-T or others) are TAXABLE INCOME. If you are taking additional distributions for MEDICAL EXPENSE reasons, then you probably, but not necessarily, might have an offsettingmedical expense deduction. But remember that medical expenses are deductible only in excess of 7.5% of AGI ( Adjusted Gross Income) which would be increased by the amount of the IRA Distributions. ( By the way, if you are unemployed, then there is no 7.5% threshhold for HEALTH INSURANCE PREMIUMS being the reason for the additional SEPP 72-T distribution.) ( Further, if you are self-employed, then the Health Insurance Premiums are a page 1 deduction, which would directly offset the distribution, and not change your AGI or Taxable Income.)If you are eligible for either of these exceptions, then there will be no 10% penalty for early distributions, but there will be federal income taxes, and possibly state income taxes in most states. If your income is low because of unemployment, or otherwise, then it might be taxable at only 15% rather than the 25% bracket above the 15% limit.Isn’t it great that we have TAX SIMPLIFICATION ????P.S. Don.t be afraid of being an “example for IRS”. If you are right in your situation, then do it. The IRS only checks 4% of all tax returns, and would probably have no idea what your situation is unless and until it decides to audit you for some completely different reason.2009-10-18 17:15, By: dlzallestaxes, IP: [18.104.22.168]