Will that put me in a higher tax bracket and added as income when I file? They took out money for federal and state when I got the withdrawal but said there might be a chance I could owe more when I file taxes.
Yes. You only can avoid the 10% early withdrawal penalty. Yes it will add to your income and might increase your tax. So don't be surprised if you owe more on your tax return. You can make an extra payment to the IRS and your state. Pay an Estimate to the IRS here, https://www.irs.gov/payments
Yes. You only can avoid the 10% early withdrawal penalty. Yes it will add to your income and might increase your tax. So don't be surprised if you owe more on your tax return. You can make an extra payment to the IRS and your state. Pay an Estimate to the IRS here, https://www.irs.gov/payments
Thank you for your quick response! Would I have to itemize deductions to get credit for my medical expenses that I used from my 401k withdrawal?
No. Oh, but it's only for the expenses that are more than 10% of your AGI. Exceptions for Early Distributions from a Qualified Retirement Plan such as a 401(k) or 403(b) plan. See Pub 575 page 35
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p575.pdf">https://www.irs.gov/pub/irs-pdf/p575.pdf</a>
..Distributions upon the death or disability of the plan participant.
..You were age 55 or over in the year you retired or left your job. (50 for qualified public safety employees)
..You received the distribution as part of "substantially equal payments" over your lifetime.
..You paid for medical expenses exceeding 10% of your adjusted gross income.
..The distributions were required by a divorce decree or separation agreement ("qualified domestic relations court order"),
The questions about exceptions to the penalty do not come after entering the 1099-R. Rather, you will see that area after you have finished all the Deductions and Credits section.
To enter the exception, starting from the "Federal Taxes" tab, select "Deductions & Credits". Select "Choose Explore on my own or I'll choose what to work on ." At the end of the Deductions & Credits section, select the "Done with Deductions" button. After several screens (depending on what entries you've made) you will come to the “Penalty May Apply” screen. Here you can pick the exception.
See page 33,
From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10%
(7.5% if you or your spouse were born before January 2, 1952) of your adjusted gross income, whether or not you itemize your deductions for the year,
It sounds like you cannot avoid the penalty when distribution is used for unremibursed medical expenses that can't be deducted, regardless of whether you actually itemize
Thank you VolvoGirl, I asked the second question incorrectly but you answered exactly what I needed. Thank you very much for the quick response and for attaching the IRS page 33 as I would of been looking forever for it. It is very much appreciated.