Tax consequences of liquidating ira love kisses ru russian online dating site

1, 2017 (when the IRS gives you a gift like that, you take it).

If you satisfy the time requirement, the IRS says distributions qualify to be both income-tax and penalty free if: When a withdrawal fits these requirements, it is called a “qualified distribution.”Certain other withdrawals still require you to pay income tax, but the IRS won’t punish you with an additional 10 percent early withdrawal penalty. You don’t have to pay the penalty if the withdrawal is for less than or equal to the amount you pay that year for tuition, books, room and board, etc.

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As a retirement saver, you may have accumulated tax-deferred money in an IRA, a 401(k) or 403(b), or an annuity.

You also may have earmarked certain taxable money for retirement, such as stock you inherited from a deceased relative.

Doing so means you pay less tax now and you allow any other retirement savings you have to keep growing.

Once you’ve used up most of your taxable account retirement savings, as well as tax-free accounts such as municipal bonds or muni bond funds, move on to your tax-deferred money, such as IRAs, 401(k)s and annuities.

There’s no major tax advantage or disadvantage to taking withdrawals from a traditional IRA or a 401(k) account first; they are treated the same for income tax purposes.

However, investment performance will be a major deciding factor.The withdrawals themselves from these accounts typically are taxed as ordinary income.By waiting to withdraw money from these accounts, you receive more tax-deferred growth.Because your contributions are always made with after-tax dollars (you already paid income tax on that money), you can withdraw your contributions before retirement without having to fork over cash for taxes or penalties. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes.The penalty for early withdrawal of earnings, except under certain specified conditions, is 10 percent of the earnings that you withdrew.Because these decisions can be complex, it is wise to seek qualified tax and legal advice.

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