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Author: JoeHLAW Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121565  
Subject: Withdrawing from Roth Date: 4/6/2012 9:00 PM
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I need to withdraw $ from my Roth to pay my taxes.
Which is best to do? Withdraw from stocks that have
gains or ones which have losses? Thank you.
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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115901 of 121565
Subject: Re: Withdrawing from Roth Date: 4/6/2012 9:27 PM
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That isn't a tax question. You can't deduct the loss. Whether or not the some or all of the withdrawl is taxable or subject to penalty is not related to the stock sale required to fund the withdrawl.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115902 of 121565
Subject: Re: Withdrawing from Roth Date: 4/6/2012 10:54 PM
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I need to withdraw $ from my Roth to pay my taxes.
Which is best to do? Withdraw from stocks that have
gains or ones which have losses?


You're not withdrawing from stocks, you're withdrawing from an account. Deciding what to sell to generate the needed cash is just like any other sell decision, except this one has no tax implications. So sell where you see the least future for the investment.

Then get busy figuring out how this happened. You shouldn't have needed to tap a retirement account to pay your taxes any more than you should have to tap it to buy groceries. Better budgeting makes for a better retirement.

Phil
Rule Your Retirement Home Fool

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115904 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 1:17 PM
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Then get busy figuring out how this happened. You shouldn't have needed to tap a retirement account to pay your taxes any more than you should have to tap it to buy groceries


??? what's a retirement accr for, I'd
not to buy groceries ?

( otoh, not good planning if you're
surprised by a big tax bill.. BTDT )

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115910 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 3:46 PM
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( otoh, not good planning if you're
surprised by a big tax bill.. BTDT )


Events of some years ignore plans.

I have all of our tax information together, but it still feels like a roll of the dice on whether we will owe or have a refund.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115911 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 4:03 PM
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Events of some years ignore plans.

Explain, please. Income tax is based on income received during a predetermined period. I believe the cover story of "Duh" magazine last month indicated that if you spend every penny you take in you won't have anything around to pay your taxes when they're due. As for emergencies, that's what emergency funds, another essential element of planning and budgeting, are for.

I'd wager I've heard just about evey reason why there's no money to pay the taxes. There may have been a couple of rare instances which were truly beyond the taxpayer's control, but I can't think of one at the moment.

Phil
Rule Your Retirement Home Fool

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115912 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 5:03 PM
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Explain, please.

We have funds to pay our income tax. Until the numbers are actually run, I don't have a clue where we stand.

We had withholding set to cover our expected tax liability. My father passed away. I received some Family Leave Pay for the time I took off without pay. There is no withholding against the Family Leave income. The EDD made it clear that income is taxable and issued a 1099.

My husband was laid off late in the year. There is withholding against his severance pay, but at what rate? Withholding didn't include the additional fixed amount that was being taken out of each paycheck and no 401K contributions were taken from the severance.

Shortly after he was laid off, he was hospitalized and has been on state disability since. Since the disability was in lieu of unemployment, the CA EDD site has a one line statement that it is taxable. I haven't been able to find any additional information on whether that is state or federal, or even if the statement is true. No 1099 was issued.

Until I obtained by father's 1099s and completed his tax returns (personal and estate), I didn't know how much income was being transferred to me. It isn't that much, but still another unknown.

Income was expected to be the same as last year. I had planned on reducing withholding because we received a refund. I doubt that we have reached the safe harbor of 110% of last years tax liability.

Over all last year was not a good year. Tax planning hasn't been at the top of my list.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115913 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 5:06 PM
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Income was expected to be the same as last year. I had planned on reducing withholding because we received a refund. I doubt that we have reached the safe harbor of 110% of last years tax liability.

This statement is an example of why last and this year should not be used when talking about tax years.

We received a refund for 2010. I had planned on reducing withholding during 2011, but didn't get around to it. I haven't checked if the 2011 withholding is 110% of 2010 tax liability.

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115914 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 5:51 PM
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Events of some years ignore plans.

Explain, please. Income tax is based on income received during a predetermined period.


I had little idea of what my tax situation would be for 2011 despite the help of a CPA in August. My husband was ill but on full pay although he would have moved to long term disability in mid-June. He died at the end of May. There was vacation paid out in August(that ended up paid to the estate) and pension payments started in Sept with some retroactive payment. My personal income is sporadic depending upon my assignments.

I did my best and ended up with a small penalty that will be waived and a larger refund than I would have liked. Shrug. Not sure why this scenario is all that hard to imagine.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115915 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 6:03 PM
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Not sure why this scenario is all that hard to imagine.

I think I didn't make my point. Life is full of unknowns, and it's rare on January 1 that one could say what the world will look like December 31. But there are two common themes in the two responses to my remark. One, life is full of unknowns. Two, in spite of same, you both have the money to pay your taxes without dipping into retirement funds.

I stand by my observation that OP shouldn't be dipping into retirement money for current expenses, should figure out why it happened, and should take steps to avoid its happening again.

Phil
Rule Your Retirement Home Fool

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115916 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 6:41 PM
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I stand by my observation that OP shouldn't be dipping into retirement money for current expenses, should figure out why it happened, and should take steps to avoid its happening again.

Let me play Devil's advocate for a minute.

The OP didn't really say why they needed to take money out of their Roth for taxes. For all we know, he's retired. And when you're retired, EVERYTHING comes out of retirement money. Even your taxes.

Perhaps he carefully planned things out, and is now at the point where he's ready to pay taxes using a Roth withdrawal. As planned.

<\devil's advocate>

I know. And perhaps the moon is made out of green cheese. ;-)

--Peter

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115917 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 7:10 PM
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Perhaps he carefully planned things out, and is now at the point where he's ready to pay taxes using a Roth withdrawal. As planned.

In the immortal words of comic Judy Tenuta, "It could happen."

Phil
Rule Your Retirement Home Fool

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Author: 0x6a74 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 115918 of 121565
Subject: Re: Withdrawing from Roth Date: 4/7/2012 7:18 PM
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The OP didn't really say why they needed to take money out of their Roth for taxes. For all we know, he's retired. And when you're retired, EVERYTHING comes out of retirement money. Even your taxes.

Perhaps he carefully planned things out, and is now at the point where he's ready to pay taxes using a Roth withdrawal. As planned.



that's how i read it ..

would be a whole 'bother thing if OP isn't retired.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116047 of 121565
Subject: Re: Withdrawing from Roth Date: 4/17/2012 11:17 AM
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I'd wager I've heard just about evey reason why there's no money to pay the taxes. There may have been a couple of rare instances which were truly beyond the taxpayer's control, but I can't think of one at the moment.

Phil
Rule Your Retirement Home Fool


I am certain you have heard alot of excuses. A friend, who I have given up trying to help straighten out tax issues, called last night. Taxes for 2008 haven't been filed. A previous check sent to the IRS bounced, and hasn't been covered. There is significant tax liability this year. The records for the cost basis for the forced stock sales have been lost. The stock has been held a long time. There have been splits, mergers and spin-offs.

There were two questions that I found entertaining:
1.) If I send all of my stock records to the IRS won't they calculate the cost basis?

2.) What do you about spending several thousand to "purchase" the right to be a travel agent to obtain discounted travel.

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