I have an IRA that was rolled over from
another IRA approximately 3 years ago. My question is since the IRA is for
retirement purposes is the interest earned for the statement period considered a source of income?
Income inside an IRA account builds tax free.
Each year the IRA account should report earnings to you, but, not on a 1099
type form like a normal bank account or stock holding. When you start to
withdraw the money from the IRA then it will be taxed.
Is the vested amount and/or interest
gained from a 401k plan considered Income?
Income inside a 401k plan builds tax free.
Each year the account should report earnings to you, but, not on a 1099 type
form like a normal bank account or stock holding. When you start to withdraw
the money from the 401k then it will be taxed.
I would like to take money out of an IRA
and pay off credit card balances and use the rest for a down payment on a
home. I understand there are penalties but I am wondering if the penalties are
less than what I would end up paying in interest charges? If my credit cards
were paid off, I would be debt free. I earn $38,300 per year and take 2
deductions.
Assuming that you are using a
"Single" filing status you would be in a 28% tax bracket. That would
mean for every dollar that you withdraw from your IRA, you would pay 28 cents
of federal tax, plus a 10 cent penalty tax, plus if you have a state income
tax potentially another 4 to 6% there. In total you would only end up with 58
Cents of every dollar withdrawn. I would look for other sources of income
first.
My mom got a lump sum out of her IRA. She
says that the money was taken out of the interest earned and isn't an early
distribution of funds. The bank reported it on a 1099-R form. It isn't a
regular distribution - one of the options offered on the tax form. Does this
money fall under the 10% penalty for early distribution?
If your mother is under age 59 1/2 at the
time of the distribution, it is probably subject to the 10% penalty. There are
a few exceptions to the 10% penalty for paying medical expenses, have become
disabled, or unemployed and making health insurance premiums. See the
instructions for IRS form 5329 either for more details on the penalty or the
exceptions.
