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Subject:  Re: IRA withdrawals & taxes Date:  12/6/1999  10:34 PM
Author:  TMFTaxes Number:  22410 of 131414

<<Approx. 4 years ago I began prematurely withdrawing funds from my IRA under the provisions of the "substantially equal periodic payment exception -- Notice 89-25." While I have paid oridinary income taxes on the withdrawal, I have claimed the exception from the penalty (I'm currently 56 years old). A number of things have happened since.

(1) I've increased the amount withdrawn due to increased living costs.

(2) The IRA has increased dramatically in value.

(3) I've had to withdraw additional funds to pay for my daughter's college education.

(4) I still haven't paid any penalty.

Any suggestions as to my position with the IRS? Should I begin paying penalties? Does the change in the value in the IRA have any bearing? Should I voluntarily go back and pay any perceived penalties?>>

As Jess pointed out, your posisiton with respect to the IRS is...well...really...ahem..."bend over". It's a sad situation, but as Jess noted, you are no longer taking substantially equal periodic payments. So at least some of your prior distributions will be subject to penalties (those that you used for qualified education expenses may be all about it in the Taxes FAQ area).

But I would certainly recommend that you take your computations and distribution information to a qualified tax pro and get the penalties worked out and (hopefully) paid. The LAST thing that you really want is to let this go for years and year...and then get nabbed by Uncle Sammy. You'll have no help from the statute of limitations with respect to these penalties. And the penalty amount accumulates very quickly.

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