Fun with IRA's

[GhostPoet]

So, i'm thinking of taking a few thousand out of my IRA to pay off my Visa...er...again. I know there's a penalty where the government keeps some of the money...but do I have to pay anything back later? I'm assuming I need to report it on my taxes, so does that mean i'm going to have a big bill i'll need to pay the government when it's time to do taxes again?

I'd hate to take out the money and find out I have to pay them like $1000 back on tax day and end up not having the money to pay them.

 

[SWAT]

The IRA? as in the Irish republican army?

 

[Metamorpho1977]

So, i'm thinking of taking a few thousand out of my IRA to pay off my Visa...er...again. I know there's a penalty where the government keeps some of the money...but do I have to pay anything back later? I'm assuming I need to report it on my taxes, so does that mean i'm going to have a big bill i'll need to pay the government when it's time to do taxes again?

I'd hate to take out the money and find out I have to pay them like $1000 back on tax day and end up not having the money to pay them.

What kind of IRA and how long have you had it?

 

[Metamorpho1977]

So, i'm thinking of taking a few thousand out of my IRA to pay off my Visa...er...again. I know there's a penalty where the government keeps some of the money...but do I have to pay anything back later? I'm assuming I need to report it on my taxes, so does that mean i'm going to have a big bill i'll need to pay the government when it's time to do taxes again?

I'd hate to take out the money and find out I have to pay them like $1000 back on tax day and end up not having the money to pay them.

What kind of IRA and how long have you had it?

 

[squeekness]

Is it an IRA or a 401K? If you take out a 401K loan, then yes, you'll have to pay it back but it's like paying yourself back so no biggie, plus you don't pay tax on it, I don't think. If you actually remove it from the 401K, then no you don't pay it back, but you do have to pay tax on it. It would be the same if you took it out of an IRA. I have both an (beneficiary) IRA and a 401K so I've dealt with this before. Whenever I've taken money out of my IRA I usually ask my handler to take out an additional 20% for the taxes up front so I don't get hit with having to pay taxes when I file for income tax later.

 

[GhostPoet]

Is it an IRA or a 401K? If you take out a 401K loan, then yes, you'll have to pay it back but it's like paying yourself back so no biggie, plus you don't pay tax on it, I don't think. If you actually remove it from the 401K, then no you don't pay it back, but you do have to pay tax on it. It would be the same if you took it out of an IRA. I have both an (beneficiary) IRA and a 401K so I've dealt with this before. Whenever I've taken money out of my IRA I usually ask my handler to take out an additional 20% for the taxes up front so I don't get hit with having to pay taxes when I file for income tax later.

It's just a basic IRA, not 401k I think. Ahh, I didn't realize you could have them hold back some of the money so I don't take the hit in my income tax.

So, I can just go to my bank, request the money (minus the penalty) and also tell them to take whatever amount to cover the tax? I'm assuming the amount I would have had to pay on my income tax is seperate from the penalty right?

 

[Judge Holden]

Credit cards are the devil. My aim is to go through life without ever using one.

 

[Metamorpho1977]

I've got a Roth IRA. After 5 years, there's no penalties and it's not taxable.

 

[squeekness]

It's just a basic IRA, not 401k I think. Ahh, I didn't realize you could have them hold back some of the money so I don't take the hit in my income tax.

So, I can just go to my bank, request the money (minus the penalty) and also tell them to take whatever amount to cover the tax? I'm assuming the amount I would have had to pay on my income tax is seperate from the penalty right?

Yup. Say you need $500 to pay your Visa. Tell them to take out say.. $575. That should allow you to pay both the Visa and give some to Uncle Sam (as far as I know the tax IS the penalty, not an additional fee. Since the funds were pre-tax when they went into the IRA, you are paying the tax when you take it out). My guy pays the tax for me, so he would send me a check for $500, though he took out $575. That's how my beneficiary IRA works and I don't see why yours would be any different. I would think a 401K removal would work the same way, only you'd probably have to put the $75 aside yourself for the tax, I don't know if the bank would move that along for you or not. My IRA is handled through Ameriprise which isn't a bank so he pays the tax for me.

 

[GhostPoet]

thanks! I think i'll head to the bank this weekend and go for it. NO MORE VISA!!!!!

 

[squeekness]

Let us know how you make out.