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My wife is getting a distribution from her former employer because of Profit Sharing. She has the option of keeping the entire amount (less 20% withholding) or rolling it into an IRA.
Since my Salary is around $110k, this will hurt tax wise for 2011 if she keeps this money instead of rolling it.
The problem is that she needs a portion of this for a car and some medical expenses. I'm thinking she rolls the entire amount, and then takes a portion out for these expenses. Since she became disabled subsequent to her employment at her previous employer, she may be able to avoid the penalty but, of course not the taxes.
Question is, how can I reduce our tax burden?? Do you think we should file "married, filing seperately" ? Or, can you offer some other suggestion ?? Thanks for your help.
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