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#2
03-09-2006, 02:21 AM
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 Re: Underpayment penalty vs. early withdrawal penalty "Phil Marti" <prm20871[at]verizon.net> wrote: - quote - > "Dave Rudisill" <denali[at]alaska.net> wrote: > > We retired early and are living off our IRAs. Since we are > > not yet 59.5 years old, every nickel we withdraw is subject > > to ordinary income tax plus a 10% penalty. (A 72(t) plan did > > not work for us.) > > > As of August 25 this year, I will be 59.5 years old. > > > As of the fourth quarter of 2005, the underpayment penalty > > rate was 7%. Wouldn't it make sense for me to simply NOT > > make estimated tax payments until after I turn 59.5? > > Wouldn't the underpayment penalty be substantially less than > > the 10% early withdrawal penalty? > You must have asked this differently, or I hadn't had enough > to drink. Your plan makes good sense. Assuming you bring > things up-to-date with the September installment, the ES > penalty will be substantially less than the early withdrawal > penalty. You can see how it's calculated on Form 2210 (the > rates may be different in 2006, but the method will be the > same). Thanks! -- Dave, soon to be old << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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#1
03-09-2006, 02:01 AM
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| Re: Underpayment penalty vs. early withdrawal penalty Phil Marti wrote: - quote - > You must have asked this differently, or I hadn't had enough > to drink. Your plan makes good sense. Assuming you bring (...snipked.......) Careful Phil, or you'll give readers the impression that we only answer questions when we get home after a hard day's work at the tax factory and are at happy hour. Come to think of it.........! ChEAr$, Harlan << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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03-08-2006, 05:32 PM
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| Re: Underpayment penalty vs. early withdrawal penalty "Dave Rudisill" <denali[at]alaska.net> wrote: - quote - > We retired early and are living off our IRAs. Since we are
You must have asked this differently, or I hadn't had enough> not yet 59.5 years old, every nickel we withdraw is subject > to ordinary income tax plus a 10% penalty. (A 72(t) plan did > not work for us.) > As of August 25 this year, I will be 59.5 years old. > As of the fourth quarter of 2005, the underpayment penalty > rate was 7%. Wouldn't it make sense for me to simply NOT > make estimated tax payments until after I turn 59.5? > Wouldn't the underpayment penalty be substantially less than > the 10% early withdrawal penalty? to drink. Your plan makes good sense. Assuming you bring things up-to-date with the September installment, the ES penalty will be substantially less than the early withdrawal penalty. You can see how it's calculated on Form 2210 (the rates may be different in 2006, but the method will be the same). -- Phil Marti Clarksburg, MD << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
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#-1
03-08-2006, 03:03 AM
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| Underpayment penalty vs. early withdrawal penalty Since nobody responded when I asked this question three weeks ago, I'll try again: We retired early and are living off our IRAs. Since we are not yet 59.5 years old, every nickel we withdraw is subject to ordinary income tax plus a 10% penalty. (A 72(t) plan did not work for us.) As of August 25 this year, I will be 59.5 years old. As of the fourth quarter of 2005, the underpayment penalty rate was 7%. Wouldn't it make sense for me to simply NOT make estimated tax payments until after I turn 59.5? Wouldn't the underpayment penalty be substantially less than the 10% early withdrawal penalty? Thanks. -- Dave << ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== > |
| Tags |
| early, penalty, underpayment, withdrawal |
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