IRA Distribution

[HopTime745]

Hi,

My husband and I are retired. In 2024, I took a very large distribution out of my traditional IRA. Ten percent was withheld automatically. I used the remaining money to purchase an investment property in another country. Even though it was for an investment, I did not purchase it in a way that treated the investment as being under the IRA umbrella. Now, I find myself having to pay around $30,000 in taxes on the distribution (according to TurboTax). Is there a way to not pay these taxes since the money was spent as investment, or should I have purchased in a way that made it clear it was still part of an IRA account? Are there are laws that relate to my situation that could help me with my current tax situation?

Also, if I do have to pay this large amount in taxes, can I set up a payment plan with the IRS instead of paying a lump sum? If so, how do I set up the plan? Is it interest free?

Thanks.

[AmeliesUncle]

No, there is no way to avoid the tax on your IRA withdrawal.

You didn't say what this "investment" was, but in some cases part of it could result in sort of deduction, but that is completely separate from the tax on your IRA withdrawal.

Yes, you can setup up an Installment Agreement with the IRS.  But there will be a setup fee, interest (currently an annual 8% rate) and late-payment penalties (an additional annual 3%-6% rate).

https://www.irs.gov/payments/payment-plans-installment-agreements

[LindaS5247]

You can apply for a payment plan with the IRS online using the following link Online Payment Agreement tool or you can apply by phone or by mail by submitting Form 9465, Installment Agreement Request.

They have short and long-term plans.  

The short-term plan is for 180 days and there is no fee.

The long-term plan has fees as follows:

•  If you apply online the setup fee is $69.
• If you apply by phone, mail, or in-person, the setup fee is $178.
• If you are Low-income and you apply online, by phone, or in-person, the setup fee is $43 setup fee.

Your specific tax situation will determine which payment options are available to you.

Also keep in mind: ‌Interest and some penalty charges continue to be added to the amount you owe until the balance is paid in full. To learn more about IRS penalties and interest.

Click here to "Apply online for a payment plan"

Click here for "Additional information on payment plans"

Click here for "Topic no. 202, Tax payment options"

Click here for "Form 9465, "Installment Agreement Request"