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fcizmar001
Level 1

Tax question: Traditional IRA w/d while unemployed but over 59.5

Hello,

I'll be 63 this December. I've been unemployed since August 2020 but I consider myself still eligible for work. Since I am ineligible for unemployment insurance compensation, I withdrew funds from a precious metals IRA on which to live in 2021. I withheld 20% to cover Federal taxes, but the IRA custodian would not withhold State taxes (I live in Michigan). 

 

My three questions:

1) If I do not get a job in 2021, will I still need to file an income tax return?

2) If yes to the above, is 20% sufficient to cover Federal withholding?

3) Instead of looking for work which has not been successful to date, should I just retire?

 

Thank you!

2 Replies
macuser_22
Level 15

Tax question: Traditional IRA w/d while unemployed but over 59.5


@fcizmar001 wrote:

 

My three questions:

1) If I do not get a job in 2021, will I still need to file an income tax return?

2) If yes to the above, is 20% sufficient to cover Federal withholding?

3) Instead of looking for work which has not been successful to date, should I just retire?

 


#1)   That depends on your total income fore the year. 

If you are a U.S. citizen or resident, whether you must file a return depends on three factors.

  1. Your gross income.

  2. Your filing status.

  3. Your age.

See IRS Pub 17

Table 1-1. 2020 Filing Requirements for Most Taxpayers
IF your filing status is... AND at the end of 2020 you
were...*
THEN file a return if
your gross income
was at least...**
Single under 65 $12,400  
  65 or older $14,050  
Married filing jointly*** under 65 (both spouses) $24,800  
  65 or older (one spouse) $26,100  
  65 or older (both spouses) $27,400  
Married filing separately any age $5  
Head of household under 65 $18,650  
  65 or older $20,300  
Qualifying widow(er) under 65 $24,800  
65 or older $26,100  

 

 

#2)   Again, that depends on your total taxable income and the tax bracket you will fall into if you must file.

 

#1 & 2 for state both requirements may be different.

 

#3 - That is a personal decision.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
fanfare
Level 15

Tax question: Traditional IRA w/d while unemployed but over 59.5

"should I just retire?"

 

Eighteen months ago it would have been impossible for you to get hired.

 

Now, the whole job market picture has changed, since people are changing careers or just not going back to work.

Employers cannot fill their open positions.

If you want to work, you should be able to find an employer.

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