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How much will the federal and state(MN) income be on an early withdrawal of $30,000.00 from a Traditional Ira?

Asked by: jbell 831 views YA Discussion

I made the withdrawal in January 2013. I believe my income bracket is 15%.
I’ll clarify better on what I did. I already took out this yr 2013 $ 11,000.00 after 10% fed and 10% state I received $ 8800.00. I will be taking out $ 19,000.00 after 10% fed & 10% state I will receive $ 15,200.00. I live in MN. What will the income taxes be that I will have to pay at the end of 2013?

2 Answers

  1. Bostonian In MO on Jan 22, 2013 Reply

    The distribution is taxed as ordinary income. Even if you are in the 15% bracket before the distribution it may well carry you into the 25% bracket so the tax could be as high as $ 7,500 if you are right on the threshold.

    In addition to the tax there is a 10% penalty ($ 3,000) if you are under age 59 1/2 in 2013 and don’t qualify for one of the limited exceptions to the penalty.

    Normally they would have withheld 20% in taxes ($ 6,000) but obviously this is not enough to cover the potential $ 10,500 total tax that will be due. Be sure to set aside enough to cover what you will owe next year. Better yet, make a payment using Form 1040-ES now to avoid spending the money before tax season next year. If you pay in too much, the excess will be refunded next year when you file your 2013 return.

    Since the distro was taken in 2013 you will report it on your 2013 next year, not on the 2012 return that you will file this year.

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  2. Wayne Z on Jan 22, 2013 Reply

    You can assume another 7% for Minnesota.

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