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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76399  
Subject: Re: HELP: IRA EARLY DISBURSMENT Date: 9/7/2000 10:15 PM
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My income is only $14851 with the $8000.00. Just does not seem right to me. I was not insured and had not choice but to pay the only way I could.

Why is this not a tax deduction? I am real confused! And pretty angry.


See page 19 of IRS Publication 590, and get a new accountant after the old one amends your return without charge, assuming this was your 1999 return. (I assume you told him about the medical expenses.)

You have to include the $8,000 in your income. There's no way around that. However, if you withdrew $8,000 from your IRA and spent $8,000 on unreimbursed medical expenses and your total income was $14,851, only $1,114 of it (7.5% of 8,000) is subject to the premature distribution penalty. Your penalty will be $111, not $800. (If you spent more than $8,000 on medical expenses, the amount of the penalty goes down.)

The penalty exception is reported on Form 5329. Also, unless you file married, filing jointly, you should have itemized deductions on Schedule A.

TMF ExRO
Phil Marti
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