I'm cashing in an ira valued at $42,000. How much income tax should I have withheld

Forum|Forum|7 years ago
June 1, 2019
4 replies
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I inherited an ira in December of 2015. I plan on closing the account soon and would like to know how much income tax I should have withheld

VolvoGirl

Employee

Probably a LOT. It will add to your regular income and will probably push you into a higher tax bracket. So for federal at least 20% or more and some for your state.

T

TaxGuyBill

Employee

You also need to find out some things. Is it a Roth IRA or a Traditional IRA? If it was a Traditional IRA, does it have an "basis"? That means that part of it was non-deductible by the original owner (the original owner would have filed Form 8606 with his tax return). You may want to contact the executor of the Estate for answers to those questions.

S

SweetieJean

Employee

If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. This means that you cannot make any contributions to the IRA. It also means you cannot roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.

Like the original owner, you generally will not owe tax on the assets in the IRA until you receive distributions from it. You must begin receiving distributions from the IRA under the rules for distributions that apply to beneficiaries.

In addition to the answers from the others, also keep state income taxes in mind.

fanfare

Employee

15 %.. Of course it depends on what other income you will have this year.
you might have no income, or a high income and already be in a high tax bracket.

An inherited IRA can be dispersed over your life time or possibly the expected life time of the decedent. meanwhile it will continue to grow tax deferred.
See IRS Pub 590B for details before you make your decision.