Paying Taxes of Partial Amount of IRA Early Withdrawal

I just withdrew a total of $104,772.95 from my NEW YORK LIFE PREMIER PLUS II IRA (includes $4,772.95 surrender charge to net $100,000). Of that amount, $64,799.19 is for tuition and other authorized expenses for my MBA (not including travel, meals and lodging per the IRS website). So, that amount is not taxable, but the remaining $39,973.76 is. I know I'll receive a 1099 for my 2021 taxes, but how do I let the IRS know that I should only be taxed for the remaining balance? Can I pre-pay state (5%) and federal (10%) taxes and submit that? Thanks for any assistance.

338

Expert Alumni

Feb 11, 2021 7:20:54 AM

Your distribution is fully taxable. Your can ask your IRA administrator to withhold federal and state taxes so that you do not have a large tax bill at tax rate (and possibly an underpayment penalty).

If you are aged under 59 1/2, only the early withdrawal penalty of 10% is waived on the portion used for higher education.

In fact, if you have qualified education expenses, your early IRA distribution is exempted from the 10% penalty up to the amount of these expenses.

Please read this TurboTax Help topic.

In TurboTax, to obtain the exemption please follow these steps:

After you have entered all your forms 1099-R, on the summary page Review your 1099-R Info, click Continue
Follow the interview until you arrive at the page titled Did you use your IRA to pay for any of these expenses?
Enter the amount of your education expenses in the box next to Higher education and click Continue
Your early withdrawal penalty will be waived.

New Member

Feb 11, 2021 7:39:22 AM

Thank you very much, I think I confused the tax penalty relief for education as non-taxable. Makes perfect sense no, so thank you!

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Paying Taxes of Partial Amount of IRA Early Withdrawal