IRA to help pay for education
I inherited a Client who has an IRA and a Non-Q account, they are both in Fixed Index Annuities. My question is that he needs money to pay for Sons education after a nasty and devastating divorce, if he pulls money out of there will he get wacked w the IRS Penalty… I’m not sure if they have changed that part of the Tax code and I’m just trying to help this guy out
Permalink Submitted by Alan Spross on Mon, 2012-07-30 22:47
If the distribution is for qualified higher education expenses, there will be no early withdrawal penalty, but ordinary income taxes will be due. For a NQ annuity, the earnings come out first, and there might be surrender charges as well on both accounts.
Form 5329 would be used to waive the penalty on the taxable amount of the distributions.