Discussion:Early IRA withdrawal penalty exception - disability
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Discussion Forum Index --> Tax Questions --> Early IRA withdrawal penalty exception - disability
| 8 April 2007 | |
| Client is 57 years old, had a severe heart attack Feb. 2006. Take money out of his IRA in Nov 2006. Distribution code on 1099 is a "1". Social security deems him fully disabled as of Feb 2006. I believe he should not have to pay the penalty? But how do I tell the IRS this? | |
| 8 April 2007 | |
| Well, I'll answear my own question; Form 5329, I should of know. 1 week to go no brains left. | |
| 8 April 2007 | |
| A heart attack will qualify the client for the exception if he is classified as totally and permanently disabled. This is different than the Social Security definition of disability in that the SSA will compensate for temporary disabilities. | |
| 26 November 2007 | |
| I have a client that wants to pull money out of his IRA. His wife is disabled. Will they qualify for this exception on a MFJ return being that it is his distribution but her disability? | |
Death&Taxes (talk|edits) said: | 26 November 2007 |
| The 5329 is filed separately for each, so I don't see how he would qualify on his 5329 for her problem. This if off the top of my head, but it seems like it stands to reason. | |
| 26 November 2007 | |
| I'm w/ D&T. Distributions "attributable to the employee's being disabled" are not subject to the 10% penalty. Sec. 72(t)(2)(A)(iii). Unfortunately, I don't think the disability of the employee's spouse can be used take the non-disabled spouse's distributions out of the penalty.
Maybe you can look at Sec. 72(t)(2)(B), distributions for medical expenses? | |
| 26 February 2009 | |
| this is an old thread, but one of the problems with this disability exception is that the code says 'attributable to the taxpayer's becoming disabled'. Does this imply only a one time distribution? Failing any further clarification I am inclined to apply the exception on an annual basis to someone who is disabled and no longer able to earn a decent living. | |
| 26 February 2009 | |
| all distributions while fully and totally permanently disabled | |
| 26 February 2009 | |
| Reading some court cases on the matter it sounds like it can be a little tricky. Just the fact that say someone had a heart attack or some other disabling condition and was unable to work for several months would not in itself necessarily negate the penalty. | |
Death&Taxes (talk|edits) said: | 26 February 2009 |
| Exactly, Dan. The standards for disability under 72(t) are much different than what you might think, and not as liberal. | |
| 26 February 2009 | |
| Perhaps this snip frpm Dwyer 106 TC 337 might be of help. For purposes of the disability exception in §72(t), the taxpayer must use §72(m)(7) and not the alternative (similar but different) definition in §22(e)(3)
[start] Section 72(m)(7) provides: (7) Meaning of disabled. — For purposes of this section, an individual shall be considered[pg. 341] to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require. S. Rept. 93-383, supra at 134, 1974-3 C.B. (Supp.) at 213 states that “Generally it is intended that the proof [of disability] be the same as where the individual applies for disability payments under social security.” The regulations, promulgated pursuant to the statutory authorization contained in section 72(m)(7), provide that an individual will be considered to be disabled if he or she is unable to engage in any “substantial gainful activity” by reason of any medically determinable physical or mental impairment that can be expected to result in death or to be of long-continued and indefinite duration. Sec. 1.72-17A(f)(1), Income Tax Regs. Significantly, the regulations also provide that an impairment which is remediable does not constitute a disability. Sec. 1.72-17A(f)(4), Income Tax Regs. [end] | |
| 14 March 2009 | |
| NYea, I appreciate your cite to the S. Rept, it's very helpful. It makes me realize how important it might be to check the SSA's rules for a qualifying disabillty. I wonder now if this statement's import might be: that if one's client can't show qualification under SS's definition (or even can't show a SS application for disabiliy) would that be grounds for the IRS to disallow the disability exception? Do you happen to know if this interpretation by the Senate committee made it into the final legislation document anywhere? | |
