If I do not have a job (thus no W-2) during the tax year that I withdraw from my traditional IRA, then do I not need to pay income taxes on my withdrawals?

Forum|Forum|7 years ago
June 4, 2019
3 replies
0 views

Say I decide to retire at age 53 and withdraw at the earliest date I can from my traditional IRA, which is 55. I do not have a W-2 that year, no taxable wages. Then do I not need to pay money when I withdraw from my traditional IRA (since no income taxes that year)?

Best answer by dmertz

Your distribution would be subject to at least the 10% early-distribution penalty. Whether or not the distribution would be subject to income tax would depend on whether the distribution (plus any other taxable income) exceeded your standard deduction or itemized deduction.

The earliest age that you can withdraw from a traditional IRA without penalty (unless you have another penalty exception) is age 59½. The age-55 exception only applies to distributions from qualified retirement plans like a 401(k) and only if you separate from service in or after the year you reach age 55.

If you are willing to pay the tax and, prior to age 59½, the penalty, you can withdraw from a traditional IRA whenever you want. For a qualified retirement plan, if you have separated from service with the company you can withdraw from the plan whenever you want and pay the tax and penalty.

S

SweetieJean

Employee

Whether you have a job or not is irrelevant. Income other than wages can still be taxable.

D

dmertzAnswer

Employee

Your distribution would be subject to at least the 10% early-distribution penalty. Whether or not the distribution would be subject to income tax would depend on whether the distribution (plus any other taxable income) exceeded your standard deduction or itemized deduction.

The earliest age that you can withdraw from a traditional IRA without penalty (unless you have another penalty exception) is age 59½. The age-55 exception only applies to distributions from qualified retirement plans like a 401(k) and only if you separate from service in or after the year you reach age 55.

If you are willing to pay the tax and, prior to age 59½, the penalty, you can withdraw from a traditional IRA whenever you want. For a qualified retirement plan, if you have separated from service with the company you can withdraw from the plan whenever you want and pay the tax and penalty.

T

tk01kjAuthor

Employee

Sorry, I meant if I stop working at age 56 and decide to withdraw my money from traditional IRA at age 60. Those four years I do not have income so no W-2. Then I am not subject to penalty and not subject to income tax?

Then if this is the case, why do people contribute to a Roth IRA when they can withdraw from their traditional IRA during a year that they do not have income, thus no income taxes?

Carl11_2

Employee

Yes. The plan administrator will send you a 1099-R reporting all withdrawals you make in a tax year. Additionally, if you are not of retirement age that 1099-R will show at a minimum, a 10% withholding for the early withdrawal penalty.