Discussion:Medial expense exeption to early withdrawel penalty
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Discussion Forum Index --> Tax Questions --> Medial expense exeption to early withdrawel penalty
DR BRISKET (talk|edits) said: | 7 August 2006 |
| My client withdrew $10,000 in IRA's last year to pay for medical expenses for her dependent son. Since she is under age 59 1/2, she would generally be subject to the 10% early withdrawal penalty, which would be $1,000. The client's total qualified medical expenses were $15,200. 7.5% of client's AGI is $12,100, meaning she has a $3,100 medical deduction for Schedule A. My question is how much, if any, of the $10,000 IRA distribution qualifies for the early withdrawal exception? I'm thinking I will have to start with the $10,000 in IRA distributions, and then subtract the 7.5% AGI threshhold of $12,200, leaving a result of zero than can be excepted. Or, would the exception be $3,100 (the total medical expenses less the 7.5% AGI threshhold). Thanks for any assistance offered. | |
Michaelstar (talk|edits) said: | 7 August 2006 |
| I have pasted in the instructions from Pub 590 for you. It would appear to me your calculation of: $15,200 - $12,100 = $3,100 is correct.
Unreimbursed medical expenses. Even if you are under age 59½, you do not have to pay the 10% additional tax on distributions that are not more than: * The amount you paid for unreimbursed medical expenses during the year of the distribution, minus
You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A, Form 1040. You do not have to itemize your deductions to take advantage of this exception to the 10% additional tax. | |
| 8 August 2006 | |
| According to the IRS agent that I talked to just recently, if the taxpayer had medical expenses over the 7.5% like only $10 the 10 % penalty does not apply. The taxpayer was questioned on their 2004 about that very fact and when I faxed a Form 5329 and a Schedule A showing medical expenses over the 7.5% the IRS said thanks for the info and there will be no penalty. Total distribution was for $9,494 and they were $1,166 over the 7.5%. | |
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