Question regarding IRA withdrawals

[Lajazz947]

I know, I know, never take them out but I had to use some IRA money to keep the house while I had no income for a while.

Question:

I am under the impression that the withdrawals, premature or not are income.

Since it is a one time occurrence can i argue with the trustee that it is not really representative of my true income?

I have forgotten to ask my attorney but I think he would argue that for me if he thought he could win.

Anybody with this experience?

[JRScott]

Well first I would tell the lawyer so that it is not a surprise.

You could argue that in the totality of circumstance it should not count as it would not be an indication of future earning.

[BKParalegal]

It is not considered income on the Means Test, because contribution, for the most part, to the 401k was from your income, which then technically it would be counting it twice.

[HHM]

Correct, it is not considered "income", but once the cash is out of the IRA, it is a cash asset.

[WoodSprite]

It is not considered income on the Means Test, because contribution, for the most part, to the 401k was from your income, which then technically it would be counting it twice.

Correct, it is not considered "income", but once the cash is out of the IRA, it is a cash asset.

I'm surprised to hear this. I believe you, but I'm surprised. Lajazz, I'm sure you know that whether or not the BK court considers it income, the IRS sure does.

<sigh...> Don't ask me how I know...

[justbroke]

I'm surprised to hear this. I believe you, but I'm surprised. Lajazz, I'm sure you know that whether or not the BK court considers it income, the IRS sure does.

<sigh...> Don't ask me how I know...

The IRS considers it income, only so far as it hadn't been taxed before sheltering. A Roth IRA can avoid the taxation.

I have a good friend at work who has been putting 20% into the 401(k) for years. Most of it (> 10%) is after-tax dollars. He can't be taxed again on it.... ever. However, the "earnings" on his pre-tax and after-tax savings, are fully taxable income.

The IRS is really good at finding ways to collect "revenue".

[Lajazz947]

It is not considered income on the Means Test, because contribution, for the most part, to the 401k was from your income, which then technically it would be counting it twice.

WOW,l this changes everything.

I definitely pass the means test if it not considered income on the means test.

I know that I have to pay the IRS the taxes and penalties but my house was worth keeping.

Thanks.

You made my weekend.

I will now adjust my means test calculations.