Pre 59 1/2 WD

Submitted by Krista McBeath on Wed, 2017-02-22 18:28

I have found conflicting information from my tax book regarding exception 7. I have a client who WD money from his IRA. The family had expenses due to losing her job and having a baby. They had about $11,000 in out of pocket medical, not enough to be able to use that as an exclusion. However, there was about $4,000 in insurance premiums that had to be paid for his wife and 2 kids. She was the one that was unemployed, not him. Under the circumstances, would we be able to waive penalty on that $4,000. I’m not sure if the unemployed person has the be the account owner or not. Also, my tax book says they have to been unemployed and drawing unemployment for 12 weeks, but I haven’t seen that in any IRS publication.



Submitted by Alan - IRA critic on Wed, 2017-02-22 19:02

Per attached code section, the IRA distribution must be made from the IRA of the unemployed person. Since that did not occur, these premiums would then be included with all other medical expenses, but these expenses are reduced by the 10% AGI floor:

72(t)(2)(D) DISTRIBUTIONS TO UNEMPLOYED INDIVIDUALS FOR HEALTH INSURANCE PREMIUMS. — 72(t)(2)(D)(i) IN GENERAL. –Distributions from an individual retirement plan to an individual after separation from employment — 72(t)(2)(D)(i)(I) if such individual has received unemployment compensation for 12 consecutive weeks under any Federal or State unemployment compensation law by reason of such separation,

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