Wally wrote:

- quote -

The penalty exemption only applies to those medical expenses
or premiums that EXCEED 7.5% of your AGI (although you do
not have to itemize to claim this exemption). Only the
amount spent in 2005 is eligible for the exemption, since
that is the year that you withdrew the IRA funds. 2006 would
be a different year and would not be eligible unless you
made another IRA withdrawal in that year.

<< ================================================== ===== > << 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. > << ================================================== ===== >

Yes, the 12 weeks can straddle 2 years.

Assuming you are a cash basis taxpayer (almost everyone is),
you can only count income and expenses in the year paid or
received. This means you can only use the $1000 actually
paid in 2005 to offset any penalties incurred in 2005 by an
early withdrawal of your IRA. No offset can be taken for
2006 unless you withdraw more from you IRA in 2006.

Dennis

<< ================================================== ===== > << 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. > << ================================================== ===== >

Sorry for cross-posting. Time's running out!

I was laid off in mid-November 2005 and started working
again in late February 2006. I collected state unemployment
compensation for exactly 12 weeks beginning 11/27/2005 and
ending 2/19/2006.

I withdrew $20000 from an IRA during 2005. I'm 50 years
old, so these were early withdrawals.

I paid medical insurance premiums, through COBRA, of about
$1000 per month in Dec. 2005 and Jan. & Feb. 2006.

According to page 48 of 2005 IRS Pub. 590, if I collect
unemployment for at least 12 weeks, I should be able exempt
the amount I paid for medical insurance from the 10% IRA
early withdrawal penalty.

My questions are:

Can that 12 weeks straddle 2 years?

Can I exempt $1000 from the 2005 IRA early withdrawal
penalty on my 2005 tax return?

Can I actually exempt $3000 from my 2005 tax return?

Can I exempt $1000 from my 2005 tax return and $2000 from my
2006 tax return?

Thanks,
Wally

<< ================================================== ===== > << 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. > << ================================================== ===== >