When I took my 10k first-time home purchase distribution a month ago, I went ahead and let the IRS take a 10 percent cut for taxes (not the penalty tax - the regular taxes that you have to pay anyway). Well, the home purchase fell through, and now I have month or so to get the money back in the IRA. So my questions are do I put back just the 9k or do I have to come up with another 1k? And how do I let the IRS know? And can I get that 1k back from the IRS?
You have to put the full 10K back. You should get a 1099-R documenting the withdrawal. It will also indicate that $1K was withheld for taxes.Assuming for now that all transactions were in 2001, you will report the $10K distribution on Line 15a (all Line numbers are from this year's 1040) and $0 on Line 15b (taxable distribution). The $1K withheld will be added to your other withholdings on Line 58.If you only return $9K, the other $1K will be subject to the penalty.The only way to get the $1K back now is to adjust your withholdings through your W-4 (or estimated taxes) to recover the $1000. You can't just write the IRS a letter and ask for the money.Ira
Thanks! Will I still be able to take the 10k penalty-free distribution later when I find a house?
Will I still be able to take the 10k penalty-free distribution later when I find a house?Yes, but if something happens so that that deal falls through too, I don't know if you would be allowed to redeposit the money a second time back into your IRA, as I think you are only allowed to take possession of the funds tax-free once in a year, as with an indirect rollover. If you have other funds you can use for your home purchase, it might be safer to use them and then reimburse yourself from the IRA after the closing.WTR
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