withdrawing from ira account

[Guest fruski]

i have been unemployed for the past 4 years and have an ira account from a divorce that i need to withdraw money for support is there any way this is done without paying a large amount of money such as withdrawing small amounts? would it simply be regarded as income? is there some kind of financial hardship exemption?

[four01kman]

Generally, money taken from an IRA is ordinary income in the year of receipt. If the recipient is less than age 59 1/2, there is an additional 10% penalty tax, unless there is an exception.

One of the exceptions is to take regularly scheduled withdrawals over a period of time. Check with your accountant or trusted financial advisor on the structure. Remember this exception only relieves you of the 10% penalty. You will still have to pay ordinary income tax on the amount taken.

[Appleby]

Originally posted by four01kman

Generally, money taken from an IRA is ordinary income in the year of receipt.  If the recipient is less than age 59 1/2, there is an additional 10% penalty tax, unless there is an exception.

One of the exceptions is to take regularly scheduled withdrawals over a period of time.  Check with your accountant or trusted financial advisor on the structure.     Remember this exception only relieves you of the 10% penalty.  You will still have to pay ordinary income tax on the amount taken.

four01kman…I know you understand this…but I need to add points of clarification for our readers who may not be as familiar with the rules as you are… the distribution is treated as ordinary income the year the distribution occurs, which is not necessarily the year of receipt. For example, if the distribution occurs in December 2002, but the IRA holder receives the check in 2003, the distribution is taxable in 2003.

The 10 percent early withdrawal penalty applies if the assets are distributed while the IRA owner is under age 59 ½

[Guest mcdonnell]

Appelby,

Didn't you mean to state "taxable in 2002"?

the distribution is treated as ordinary income the year the distribution occurs, which is not necessarily the year of receipt. For example, if the distribution occurs in December 2002, but the IRA holder receives the check in 2003,

the distribution is taxable in 2003

[Appleby]

mcdonnell, good catch.. I did mean 2002.

...thanks