- quote -

You'll owe the 10% penalty tax. If this income, added to
your other income, leaves you with no net taxable income,
you won't owe other tax.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
- quote -

It was rolled from a 401k, not an IRA.

- quote -

You do it by paying the tax and early withdrawal penalty at
the time of the rollover.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"Barry Margolin" <barmar[at]alum.mit.edu> wrote:
- quote -

Now how would somebody roll over money from an IRA into an
ordinary mutual fund? Pretty clear this is an IRA
distribution.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

atlantic965 wrote:

- quote -

I apologize for not snipping parts of the question which may
be irrelevant, because I'm not entirely sure which ones they
are.

I think the T ROWE PRICE person was referring to the 10%
penalty on early withrawal from a retirement plan, if you
are under age 59-1/2. There are exceptions, though. One
that may apply to you is code 05 on form 5329.

Basically, whether or not you itemize deductions, or even
would otherwise need to file a tax form, the amount that
WOULD be deductible as medical expenses on line 4 of 1040
Schedule A (total medical expenses less 7.5% of AGI
(Adjusted Gross Income)) can be excluded from the amount of
the early withdrawal on which you would otherwise be
required to pay the 10% penalty tax.

Form 5329 can be filed by itself if you are not otherwise
required to file a 1040-series form.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"atlantic965" <atlantic965[at]yahoo.com> writes:

- quote -

The $1,000 will be added to your other income for the year
of withdrawal and taxed accordingly. If you don't have
enough medical expenses to meet the penalty exception (See
Publication 590), you'll owe a $100 premature distribution
penalty whether you have enough income to owe income tax or
not.

Phil Marti
Clarksburg, MD

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"atlantic965" <atlantic965[at]yahoo.com> wrote:

- quote -

1) T Rowe Price isn't in the tax business. Their advice is
worth what their tax credentials are. 2) The distribution is
subject to tax and penalty, which is a MINIMUM of $100 even
if your tax is zero.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Depends on your age (if you are not at least 59 1/2) but the
10% penalty for early withdrawal may not apply if your
medical expenses are more than 71/2% of your income.

The $100 is the 10% penalty. In some states there is also a
penalty (California is an added 2 1/2%.)

Nan, EA in LA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

"atlantic965" <atlantic965[at]yahoo.com> wrote:

- quote -

Is this an ordinary mutual fund, or an IRA? I'm going to
assume it's an ordinary mutual fund.

- quote -

That seems like quite a bit of tax for an ordinary mutual
fund withdrawal. You should only have to pay capital gains
tax, which is taxed on the difference between the selling
price and the cost basis. At the time you rolled over from
the 401K, you should have paid tax on the total value of the
withdrawal, and your cost basis would be reset to the price
of the fund at that time.

So if you rolled over $3,000 from the 401k, and it has since
grown to $4,000, only $333 of the withdrawal you have
planned should be taxed. And at your income level, it will
be 10% capital gains tax, so you'll only owe $33 in tax on
it.

On the other hand, if this is an IRA, there are two
components to the tax. The rollover from the 401k to the
IRA was tax-free, so you're taxed on the entire withdrawal
as ordinary income. Also, if you're under retirement age,
there's an additional 10% tax for early withdrawal.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

If you are under 59.5 years of age, you are going to pay a
10% penalty, which is the $100.

Helen, EA in PA
Director, NAEA; Immediate Past President, PSEA; Tax Expert, AOL
Enrolled Agents - THE Tax Professionals

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

atlantic965[at]yahoo.com (atlantic965) posted:

- quote -

Assuming you are under age 59 1/2, the PRICE person advised
you correctly. 401k accounts are funded with _before tax_
dollars. That means your contributions were deducted from
your total taxable income reported on your W-2 from your
"former employer." When you rolled the amount over, it
remained untaxed.

This delay in taxation was allowed with the understanding
that you were being encouraged to save for your eventual
retirement. The bargain made, is that you won't touch those
funds -- or any earnings therefrom -- before you reach
retirement age (currently defined as the year in which you
reach 59 1/2). If you do withdraw any money from this
"protected" account, you owe the tax which you did not pay
when you originally earned the money.

Also, if you make withdrawals before reaching the
"retirement age," the deal calls for you to be charged a
penalty of 10% of the amount taken -- which is assessed as
additional income tax.

That's the deal implicit in retirement savings deductions
from income, whether they be IRAs, 401ks, 403(b)s or
whatever else.

Sorry 'bout that. It's just the way things are. And there
are no exceptions because your investment turned out to be
unproductive, so your gains or losses within the 401k or
IRA, have no bearing on the taxes due.

Bill

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I have $4000 saved in my Mutual Fund which was rolled over
from a 401k from my former employer. I need to withdraw
$1000 to pay for some dental work and the TROWE PRICE person
says I may be on the hook for $100 in taxes. Since I started
this 401K and fund I have not earned enough to pay taxes, My
income has always been less than $14k a year. I own no
property and such. Any advice here would be appreciated.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->