I am looking to early withdrawal from my IRA to pay for medical insurance premiums, as they are considered an exception to the 10% penalty when unemployed for 12 weeks or longer.
https://www.irs.gov/taxtopics/tc557
When I go to my IRA provider online service portal to withdraw the funds, it asks for what my withholding should be. Should I be taking the default 10%, the actual margin tax rate as listed in the IRS W4-R form, or 0% since this would directly pay for the premium?
https://www.irs.gov/pub/irs-pdf/fw4.pdf
For example, lets say my insurance premium is $1k/month. For the IRA withdrawal, should I do:
1. $1k withdrawal - 10% withholding for $900 in my bank (leaving a $100 shortfall to pay the insurance premium)
2. $1k withdrawal - 24% withholding for $760 in my bank (leaving a $240 shortfall to pay the insurance premium)
3. $1k withdrawal - 0% withholding for $1000 in my bank
I feel like it should be 0% since it is going directly to the insurance premium, but I also know this is considered earned income. But then it seems like funny money if I instead take $1240 to account for the 24% withholding to pay the $1k insurance premium.
Thanks for any help!
