Early Withdrawal
2014-05-06 by Eva Rosenberg
Today TaxMama® hears from Nic in the TaxQuips Forum, with this common misconception. “Nic is disabled and withdrew his money from his retirement plan. Now he’s trying to figure out how to avoid paying taxes on this money.”
Dear Nic and Family,
Mike Reed, EA and I tried to explain this to Nic very explicitly. Yet, he persisted in believing that his withdrawal should not be taxed. He is not alone in that belief. So, let me clarify this before you draw out your retirement, too.
Yes, it is true that there is special tax treatment provided to those who must retire early due to a permanent disability. (Note: I said PERMANENT, not just something that will keep you helpless for a few months or a year.) (Also, there are 6) One last thing that is not in the recording – When you draw the money directly from the retirement account, there is NO waiver of the penalties. That waiver is only available if you first move the money to an IRA and THEN take the draws.
And remember, you can find answers to all kinds of questions about early withdrawals and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
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