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moe29 · Oct 2, 2009, 03:00 PM

Hi,
I have a Traditional IRA saving acct. I need to withdraw from IRA I have a total amount of $46,236.00 the amount I need to withdraw is $36,236.00.

I am 50 yrs old I was laid off my job last year. I realize if I do a early withdrawal I am subject to Federal tax withholding and penalties.

My question is if I take out $36,236.00 early. How much Withhold Federal income tax should I have withheld 10%, 20%,30%? And what are the penalties?

Thanks

Five Rings · Oct 4, 2009, 08:26 AM

Borrow the money someplace else using the IRA as collateral.

You will pay tax on the 36,000 as income plus an additional $3,624 penalty. DON'T DO THIS!

MukatA · Oct 5, 2009, 03:25 AM

Early withdrawal is subject to 10% penalty plus the withdrawal is treated as your ordinary income.
You have little income in 2009 so your average income tax will not be high. Your U.S. Tax Return: Traditional IRA and Roth IRA

Five Rings · Oct 5, 2009, 07:02 AM

Do the math MukatA.

Borrow the money someplace else if you can moe29.

ebaines · Oct 5, 2009, 08:34 AM

Five Rings - your advice is good, but you're not answering the OP's question. At least Mukata provided some information related to what the OP was asking about.

Moe29 - Usually the plan custodian will automatically withhold 20% - whether that is the right amount or not is impossible to say as we do not know what your adjusted gross income will be for 2009, nor your filing status. If you are married filing jointly, and this withdrawal is your entire income for the year, then to Mukata's point you will owe little in income taxes, but you will have to pay 10% in early witjhdrawal penalty. I am assuming here that the money is NOT being used specifically for one of the purposes that are exempt from the 10% penalty (tuition for higher education, or to buy, build, or repair your home, or for health insurance premiums, or for medical expenses in excess of 7.5% of your gross income, or you are disabled). Don't forget also that if you live in a state with income tax you have to pay that as well.

Five Rings · Oct 5, 2009, 08:57 AM

Quite to the contrary; I answered it in the first post.

MukatA's answer suggests that his tax will be minimal. That is no answer.

You will note that my initial response was repeated by MukatA with the addendum that "your average income tax will not be high". That is pure speculation without knowing his circumstances.

I assume the OP is receiving unemployment compensation; perhaps some other passive income is also involved and will be added to taxable income. Perhaps there is a spouse earning income.

My answer is simply this; don't do it.

I appreciate your adding to the detail concerning early withdrawal ebaines.

AtlantaTaxExpert · Oct 5, 2009, 02:05 PM

Five Rings:

I agree with your advice NOT to withdraw the IRA money; the taxes and penalties are so high that investigating all other options MUST be done before making such a withdrawal.

However, borrowing the money and using the IRS as collateral is a prohibited activity under current IRS regulations and would result in similar punitive taxation should the IRS discover the nature of the loan.