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Started By
Message
Owe $15K-$18k in fed taxes
Posted on 4/13/21 at 12:49 pm
Posted on 4/13/21 at 12:49 pm
Pulled money out of TD Ameritrade IRA
early in 2020. Took out the 10% penalty but not enough fed taxes. Screwed up, I know.
Now, I owe that back.
What's the best way to go about this?
I really didn't want to write the check for the whole thing, but that may be the only option?
Thanks for the help
early in 2020. Took out the 10% penalty but not enough fed taxes. Screwed up, I know.
Now, I owe that back.
What's the best way to go about this?
I really didn't want to write the check for the whole thing, but that may be the only option?
Thanks for the help
This post was edited on 4/13/21 at 1:05 pm
10
Posted on 4/13/21 at 12:53 pm to sirmixalot
I thought cap gains on 401k withdrawals were waived up to 100k for 2020?
Posted on 4/13/21 at 12:59 pm to DownshiftAndFloorIt
the 10% penalty was waived if selected...still owe federal taxes on the rest.
Posted on 4/13/21 at 1:00 pm to DownshiftAndFloorIt
quote:
I thought cap gains on 401k withdrawals were waived up to 100k for 2020?
That's the 10% penalty, you still have to pay federal income tax. There are no capital gains for 401(k)
Posted on 4/13/21 at 1:05 pm to jchamil
edited, it was not 401k. It was TD Ameritrade IRA, which I believe is treated the same way with early withdrawals.
Posted on 4/13/21 at 1:15 pm to sirmixalot
I would imagine write the check for the whole amount to avoid interest
Posted on 4/13/21 at 1:27 pm to sirmixalot
quote:No, you can set up a payment plan with the IRS. It's typically better to call them to set it up, but there might be a way to do it all online now. I've always called when a client needs to go this route. Given how crazy 2020 was financially, they might work with you on your interest and penalties. Have all necessary documents in front of you when you call, and be prepared to wait for hours if you're calling in the next few days
I really didn't want to write the check for the whole thing, but that may be the only option?
Posted on 4/13/21 at 1:42 pm to sirmixalot
If its a covid related distribution in 2020, qualifying individuals can withdraw up to $100,000 penalty-free from their IRAs or company retirement plans. The withdrawals are still taxable, but the income can be spread evenly over three years, or reported all in one year.
Posted on 4/13/21 at 1:45 pm to sirmixalot
You can spread it over three years and the 10% penalty is waived if you make the selection it was due to Covid.
I think I read you can even contribute the money back to the IRA over 3 years and not pay taxes on it, but better double check that.
I think I read you can even contribute the money back to the IRA over 3 years and not pay taxes on it, but better double check that.
Posted on 4/13/21 at 2:10 pm to The Spleen
Correct. The funds that were withdrawn can also be repaid for up to three years from the day after the distribution. You will need to amend your tax return to get the taxes back.
Posted on 4/13/21 at 2:12 pm to sirmixalot
If you took it out because of COVID (hint hint) you can spread the taxes over 3 years.
Posted on 4/13/21 at 2:47 pm to sirmixalot
quote:
If its a covid related distribution in 2020, qualifying individuals can withdraw up to $100,000 penalty-free from their IRAs or company retirement plans. The withdrawals are still taxable, but the income can be spread evenly over three years, or reported all in one year.
IRS Form 8915-E and get an accountant this year.
Posted on 4/13/21 at 3:21 pm to sirmixalot
What they said...
This post was edited on 4/13/21 at 3:24 pm
Posted on 4/14/21 at 8:53 am to sirmixalot
Agree with the previous responses, the Cares Act allows people who took money out due to Covid (very wide definition) to spread the tax hit over 3 years and avoid the 10% early withdrawal penalty.
Posted on 4/14/21 at 9:07 am to sirmixalot
quote:
Pulled money out of TD Ameritrade IRA
early in 2020. Took out the 10% penalty but not enough fed taxes. Screwed up, I know.
Now, I owe that back.
What's the best way to go about this?
I really didn't want to write the check for the whole thing, but that may be the only option?
Thanks for the help
I thought the 10% penalty was waived for 2020
I understand that you didn't take out enough in FED taxes but the 10% should have covered at least a portion of that
You must have taken out quite a bit to be looking at a 15K+ tax bill
Why did you take out so much?
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