mimi Posted April 16, 2011 Report Share Posted April 16, 2011 My client withdrew from his IRA in January 2010. He was deemed disabled in Aug 2010 by SSA. Does he qualify for the exception to the 10% penalty even though he withdrew the money before being officially declared disabled? Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted April 16, 2011 Report Share Posted April 16, 2011 He doesn't need to be "officially" disabled. A doctor's letter certifying that he was permanently disabled will also suffice. Quote Link to comment Share on other sites More sharing options...
mimi Posted April 16, 2011 Author Report Share Posted April 16, 2011 Thank you for your reply. I am aware of the doctor's note option. My question is can the exception be applied if the client took the withdrawal first (Jan) and was later declared disabled (Sept). The pubs state "distribution taken DUE TO disability", so was wondering if it made a difference which came first. Quote Link to comment Share on other sites More sharing options...
grandmabee Posted April 17, 2011 Report Share Posted April 17, 2011 why did they take the distrubtion in January? Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 17, 2011 Report Share Posted April 17, 2011 Assuming he took it in Jan because he was disabled and not working, yes, he can use the exception. It normally takes some time to get it 'official', so if he got that in Aug he was probably disabled before the end of 2009. I know it took 11 months for my husband, although the doctors had stated it even before that. He had his handicap tags for the car over a year before the 'official' ruling by SSA. Of course, if he took it out to buy a speedboat in Jan, while still working, and then got hit by a bus and disabled in March, that's a different situation. :dunno: Quote Link to comment Share on other sites More sharing options...
mimi Posted April 17, 2011 Author Report Share Posted April 17, 2011 why did they take the distrubtion in January? I clarified this with client today. Had health issues related to an accident around Sept 2009. Was reinjured by another accident. Was terminated by employer in Dec '09. Employer was fighting unemployment, and client found out employer had cancelled his health insurance in Oct 2009. He took the distribution to pay bills while dealing with health issues that progressively became worse as the year went on. I don't think the client realized at that time that the health issues would progress and lead to disability. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted April 17, 2011 Report Share Posted April 17, 2011 Exception 05 on Form 5329 might also apply. taxbilly Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.