72(t) Question

[MAMalody]

I am unable to find an example on point. In reference to premature distributions from a qualified retirement plan to pay for unreimbursed medical expenses. I understand the distribution from a qualified retirement plan to pay for unreimbursed medical expenses TO THE EXTENT they exceed 7.5%, regardless of whether or not the participant itemizes deductions.

The questions is, taxpayer has $10,000 in unreimbursed qualified medical expenses. The 7.5% is around $4,000. If a premature distribution of $5,000 is taken, is it fully exempt from the penalty? Does the date of the distribution play any part in the determination or is the distribution applied first regardless of when the expenses are incurred or paid?

I must have looked too fast because this cannot be an unusual situation, even though I have never seen it.

[kcjenkins]

Yes, the withdrawal is exempt from the extra 'premature withdrawal' penalty, up to 6K in your example. Both the medical expenses and the withdrawals are based on the totals for the year, rather than matched to timing during the year.

[MAMalody]

Great! I appreciate the info. That solves my problem. Why can't I find that???? Hmmm.

[OldJack]

>>Why can't I find that???? <<

Because it is logical.

[kcjenkins]

It's my personal opinion that IRS pubs are getting steadily worse written, probably because the code itself is getting so much worse as they constantly try to achieve political goals through tweaking the code.

[kcjenkins]

http://www.ijreview.com/2013/03/39183-cartoon-how-obama-lays-blame/

[GeneInAlabama]

I think that the problem is that language changes and young people speak a different language than older people. Almost all IRS pubs, assembly instructions, etc are written by people younger than me. An example is one time my daughter told me that her son went through a road block and got a ticket for not having insurance. I thought she meant that he drove on through the road block withhout stopping and they chased him down and gave him a ticket. She meant that he was stopped at a road block and got a ticket. Small differences in words can make a difference, and young people and old people look at those differences differently. Our language is constantly changing.