The Tax Man

[DeckerEnt]

Got a letter in the mail from the irs last week. Seems I took some money out of a roth IRA and didn't put it on my tax forms for 2007. I didn't take out all of it, just some principle that I had put in it. I asked my financial guy and he said if I am not taking out intrest, then I was good. Well, I saw on the form that the office hours were till 8:00 pm. It was only 6:30 so I called. Turns out I have to fill out a form declaring what I put in, what I took out, and when, and there should be no problem. I will post up what happens. Hopefully not from the poor house. Get this, I took out 12,000 to pay some bills, they want to tax, penalty, and intrest in the amount of 6,000. WTF!!!! 50%!! You have to be kidding me. More later.....

[Mista Bone]

Write them a IOU :)

[2Kblacksleeper]

You could offer the a discount of 4500.00 to clean there clunky carpets?

All joking aside, I wish you good luck. Some of my family members have not had a pleasant experience with them.

John

[04 Venom]

Got a letter in the mail from the irs last week. Seems I took some money out of a roth IRA and didn't put it on my tax forms for 2007. I didn't take out all of it, just some principle that I had put in it. I asked my financial guy and he said if I am not taking out intrest, then I was good. Well, I saw on the form that the office hours were till 8:00 pm. It was only 6:30 so I called. Turns out I have to fill out a form declaring what I put in, what I took out, and when, and there should be no problem. I will post up what happens. Hopefully not from the poor house. Get this, I took out 12,000 to pay some bills, they want to tax, penalty, and intrest in the amount of 6,000. WTF!!!! 50%!! You have to be kidding me. More later.....

You may want to think about a different financial guy. He should have told you of the forms to fill it out. You may be OK if you held the money in the Roth for 5 years or more.

[Mista Bone]

About as bad as my issue....I don't owe any "income tax"......just social security/FICA "self employment tax" for the past 2.25 years and then all of this year.

What is 14-15% of $36,000 plus fines and interest?????

Oopsie. Guess I won't be looking at a new toy for a while.

[Mista Bone]

Oh yeah........my house that I lost.....seems the difference between what I owed (64k) and what the bought it for, I owe tax on that as well.

Yeah, I'm gonna need a GOOD accountant for this.

[YTryCobra]

Hey Keith. Sorry to hear that. Sounds like you need a new financial guy. He should have told you the in's and out's of that. Good luck.

[Gearhead]

Got a letter in the mail from the irs last week. Seems I took some money out of a roth IRA and didn't put it on my tax forms for 2007. I didn't take out all of it, just some principle that I had put in it. I asked my financial guy and he said if I am not taking out intrest, then I was good. Well, I saw on the form that the office hours were till 8:00 pm. It was only 6:30 so I called. Turns out I have to fill out a form declaring what I put in, what I took out, and when, and there should be no problem. I will post up what happens. Hopefully not from the poor house. Get this, I took out 12,000 to pay some bills, they want to tax, penalty, and intrest in the amount of 6,000. WTF!!!! 50%!! You have to be kidding me. More later.....

Hey Keith -

Make sure that when you fill out the forms that you don't have any errors, mistakes, etc and they are filled out completely with all the needed information. Triple check them before you send them back to the IRS.
I worked at the IRS for 6 years and the #1 problem that caused delays or issues were forms not completed correctly.

Your tax/financial guy should've known about this !!

Scott

[DeckerEnt]

I know. I should have mentioned it to my tax guy too but thought I didn't need to. It should get all worked out soon. I will post up what happens.

[06hoss]

I think you're going to find that your tax bill will be a lot less than 6K.
It sounds like you took an early distribution. You will have to pay the early distribution tax of 10% plus interest from when your return was due...4/15/08 (unless you filed an extension) until now. I'm betting easily under 2K.
That's assuming that you only took out contributions. What happened is your financial institution sent IRS information on the amount you withdrew.
What IRS most likely is saying is that you owe regular income tax on that amount (depends on your tax bracket), plus interest on that amount, plus a penalty for not paying it on time. That part of the bill should go away once you prove you only took out contributions. Since they don't know what your contributions are, they tax you for all of it until you prove otherwise. PLUS they are of course saying you owe the 10% early withdrawal tax on top of regular income tax...that's how it got all the way up to 6K. The 10% part plus interest is probably all you owe.
Here is a link with a flow chart on it that will show you how you owe the early distribution tax...scroll down to page 68 and it's pretty easy to figure out.
http://www.irs.gov/pub/irs-pdf/p590.pdf

[DeckerEnt]

Well, I talked to my financial guy today. He is going to mail me all the info I need. Then I will take that info to my tax guy and let them figure it out. Being a roth IRA, after tax money was invested so I already paid taxes on it once. I am hoping to walk away oweing no taxes. Well praying is more like it. Will update when I know more.

[06hoss]

I wish you luck...and you right...you already paid regular income tax on the contributions once, but that 10% tax is another tax that is like a penalty because you took it out early. I don't see them waiving that, but good luck anyway.

[DeckerEnt]

Got the tax letter in the mail today! I owe nothing!!!!!!! Hooray Me!!!! Seems my cpa for the company's letter to them straightened it all out. Guess I have a little luck left.

[02mingryGT]

Congrats!