In other words, if we take the 401(k) employer match out of the comparison (either because the employer doesn't offer a match, or because it's already been maxed out), is there any significant difference between a 401(k) and a traditional IRA?
From what I understand, both have tax-free money going in, and get taxed on the distributions during retirement. so if there are differences, I don't know what they are.
So I contributed to a Roth IRA account for 2009 and didn't realize until I started doing my taxes that I should have contributed to a Traditional IRA to be qualified for a deduction. Can I move those funds from the Roth IRA to the Traditional IRA without it being considered a conversion? just hoping there was something I could do to fix it since I know you have up until April 15th to contribute for the previous year.
Why would you do that? all investment distributions from a TRADITIONAL IRA are taxed as ordinary income. The ROTH IRA contributions have already been taxed. this makes absolutely no sense. Leave it in the ROTH IRA account.
If your income exceeds the ROTH IRA qualification limits, I recommend seeking a tax professional for assistance.
Taxes are due on the amount rolled over, but the 10% penalty on early withdrawal from an IRA is waived. you can transfer money into a Roth IRA if your adjusted gross income is no more than $100,000 in the year you make the transfer.
The gift giver is 67 years old with 401k and IRA. The receivers are her children. what kind of taxes can be avoided, and which still must be incurred, and at what rate then?
Thanks so much.
You will have to take a distribution from your IRA or 401k before you give it to anyone. When you take the distribution, it is taxable income to you, at your current tax rate. The fact that you are giving it to someone does not change the income tax you have to pay.
If you give $12,000 or more in one year to an individual, you will have to file a gift tax return. however, you will not owe any gift tax until your lifetime gifts as reported on your gift tax returns exceed $1 million dollars.
If you bequeath your 401k or IRA to your children, when they take distributions, they will pay income taxes at their current tax rates.
My husband had $1400 in a 401k (most was contributed this year) he lost his job and it was rolled over into an IRA. We did not do the rollover within 60 days. he is disabled and will not be going back to work.
Here are my questions – 1. will we have to pay taxes on the 401K since it was not rolled over within 60 days. 2. if we cash out the IRA now, would we have to pay taxes on both the 401k and the IRA?
When you cashed out the 401k, 20% federal income tax should have been withheld from your distribution as a prepayment toward you tax liability. if you did not contribute the gross amount of the distribution within 60 days, it is taxable. You will report the 401k distribution as income, take a deduction for the $1400 I assume you contribute to an IRA, but then if you cash out the IRA in the same year, you will be taxed on that amount too. the distributions are added to your income and taxed at your normal income tax rate. the 20% withheld will be credited as a tax payment toward your overall tax liability. if you are under age 59 1/2, you pay an addtional 10% tax when you file your return.
You will be charged 10% penalty if the rollover happened outside the 60 day window, but only if your husband was younger than 59 1/2.
While you will be liable for state and federal income tasex on the $1400, you will also get a $1400 deduction from your net income for the new IRA. Therefore, it will be a wash on this income tax return.
You will be forced to pay taxes again, when you finally do cash this in.
did you roll it over into an IRA or did it just stay in the 401k? if you didn't specifically move it into an IRA, its still in the 401k and that's fine and not taxable. if you did roll it over, I'm not sure why you would have to roll it again within 60 days.
If you do cash it out, then yes, you will have to pay federal and state taxes on it, as well as a 10% federal penalty.
there will be 10% penalty no matter what
but if the amount is only $1400, how much is taxable will depend on how that impacts your total income
if you are married, filing jointly your non taxable income is $18700, so however much this increases that amount will be taxable, at least at the lowest rate currently of 10%
you still may be eligible for EIC, that is something only you can determine when you know your total earned income
if someone under age 59 1/2 wants to take money out of a Traditional IRA, they would have to pay a 10 % penalty and taxes. But what if they converted the Traditional IRA to a Roth IRA first? (and they can maybe convert only the amount they need). Then – as I understand Roth IRAs – there is no 10% penalty to withdraw from a Roth. Is this true?
Also, Can you w/d from a Roth anytime without incurring or do you have to wait 5 years after conversion?
What you propose looks like a loophole to avoid the 10% penalty, but in fact there is no loophole. your converted money has to sit in the account for five years before you can take the money out without penalty (and then only if you are age 59.5 or older, or meet another exception).
There are circumstances when there is a 10% penalty on distributions from a Roth IRA. For example, if you take out earnings before age 59.5 (and you do not meet another exception such as disability), you will pay a 10% penalty. and as mentioned above, if you take out converted amounts there may be a 10% penalty if the money hasn't been in the account for five years, or you are under age 59.5 or do not meet one of the other exceptions.
When you convert the money from a traditional to a roth you must pay the taxes on the money. You are going from a pretax situation to a post tax situation.
You can't withdraw money from a ROTH without penalty.
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