Discussion:401K to IRA problem
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| Revision as of 02:18, 15 January 2008 Rgtaxservice (Talk | contribs) (Had your client) ← Previous diff |
Revision as of 03:47, 15 January 2008 Snooks (Talk | contribs) (Your observation) Next diff → |
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| + | {{ForumReplyPost|UserID=Snooks|Date=15 January 2008|Text=Your observations are correct and it was coded 1. Client disagrees with the unintended outcome and wants a solution. I can't say that I disagree. The origin was 401K and it was kept separate from other IRA funds. Surely there is some example where the IRS has granted relief in such a situation. I can not find one close enough that I would feel comfortable fighting it, but still looking. A year earlier, no penalty and a few days later, no penalty. You surely can't blame a client for not paying the 10% up front. Should he sought advice? Yes. Is this an unfair treatment of a taxpayer that lost his job after age 55 and had expected to find another and didn't? You bet it is. The law stinks and I am just trying to find some way to solve this problem. }} | ||
Revision as of 03:47, 15 January 2008
Discussion Forum Index --> Basic Tax Questions --> 401K to IRA problem
Discussion Forum Index --> Tax Questions --> 401K to IRA problem
| 15 January 2008 | |
| I have a client that lost his job after age 55. He took part of his 401K free of the 10% penalty due to the loss of job after age 55. The remaining 401K money was rolled into an IRA. Low and behold, just days before he turned 59 1/2 he took the rest of the money (originated in 401K) from the IRA. Now the IRS is insisting that the 10% penalty applies and my client is in shock. In his mind, it is the same money the year before that was exempt from the penalty. IRA's do not have a job loss after age 55 provision like the 401K. The client is caught in a technical snafu and I would like to find a way out of it. Had he taken it from the 401K, no penalty. Had he waited a few more days until age 59 1/2, no penalty. Is there any possible solution to this very unfortunate set of facts? | |
Rgtaxservice (talk|edits) said: | 15 January 2008 |
| Had your client contacted you before making his withdrawl, no penalty.
I take it that this occurred and was reported for in TY2006. Otherwise why would the IRS be asking for it. Why wasn't the penalty reported on the tax return then? Did it have a dist code of 1, 2, or 7? | |
| 15 January 2008 | |
| Your observations are correct and it was coded 1. Client disagrees with the unintended outcome and wants a solution. I can't say that I disagree. The origin was 401K and it was kept separate from other IRA funds. Surely there is some example where the IRS has granted relief in such a situation. I can not find one close enough that I would feel comfortable fighting it, but still looking. A year earlier, no penalty and a few days later, no penalty. You surely can't blame a client for not paying the 10% up front. Should he sought advice? Yes. Is this an unfair treatment of a taxpayer that lost his job after age 55 and had expected to find another and didn't? You bet it is. The law stinks and I am just trying to find some way to solve this problem. | |
