I Need to Collect IRA Early. Are There Penalty Withdrawal Exceptions?

You must be 59 and a half to withdraw from your IRA. However, there are exceptions to the 10% early withdrawal penalty tax.

The whole point of an IRA is to put money away for retirement and let it grow. When you don’t allow the money in your IRA to grow and you withdraw before the age of 59 ½, there is an early withdrawal penalty of 10%  tacked onto the already existing income tax. That means you’ll end up paying an IRA withdrawal tax when filing your tax return.

IRS Withdrawal Before 59 ½

Maybe you want to pay off  your high debt or maybe you just need cash. Whatever your case may be, if you aren’t 59 ½ and desperately need money from your IRA, you can withdraw early and will be required to pay penalty tax. The penalty is 10% on top of your existing income taxes.

Exceptions to the 10% IRA Withdrawal Penalty

There are exceptions to the 10% early withdrawal penalty.This means if you fall within one of the following categories you can withdraw from your IRA before the age of 59 ½ without facing ugly penalties.

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Can I Claim Head of Household on My Taxes?

Head of Household provides several tax benefits, but you must meet several requirements in order to claim it

Of the five filing statuses you can choose when you file your tax return – Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) – Head of Household is one of the less frequently claimed. But for those who qualify it can provide ample benefits, such as lower tax rates and a higher standard deduction.

Who qualifies as Head of Household?

In order to qualify as a Head of Household you must meet the following requirements:

  1. You were unmarried or considered unmarried on the last day of the year.
  2. You paid more than half the cost of keeping up a home for the year.
  3. A qualifying person lived with you in the house for more than half the year (except for temporary absences, such as school). However if the qualifying person is your dependent parent, they do not need to have lived with you.

Who does the IRS consider unmarried?

The IRS considers you unmarried for the whole tax year if you were unmarried on the last day of the year, or legally separated from your spouse under a divorce or separate maintenance agreement. That means you could have been married all year, but as long as you got divorced by December 31st the IRS considers you unmarried. Continue reading “Can I Claim Head of Household on My Taxes?”

Is There An Advantage to Filing Taxes Jointly?

For most couples, it’s best to file taxes jointly. By doing so, there are advantages including tax breaks.

Are you wondering if you should file your taxes jointly or separately? For couples that have recently tied the knot and even for those who have been married for years, this is a very common question. For most couples, it’s best to file taxes jointly. By doing so, there are advantages including the IRS extending tax breaks.

For the majority of couples, the benefits of filing taxes jointly outweigh filing taxes separately. However, there are certain situations when it’s best to file separate returns. For example, couples with one spouse having a large total of medical expenses, filing separately may pay off.

The Need-to-know Facts

  • You may file jointly if you are legally married (if you were legally married on or before the last day of the year).
  •  By filing jointly, both individuals report all income, deductions, and credits onto one tax return.
  •  Upon deciding to file taxes jointly, both spouses must agree to file a joint tax return and both must sign the return.
  •  In the case that during the tax year your spouse has died, you still have the option to file jointly or separately.
  •  You are responsible for your spouse. According to the IRS from Publication 501 (regarding filing jointly):

“Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return…One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.” Continue reading “Is There An Advantage to Filing Taxes Jointly?”