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IRA Withdrawals Can Be Costly

IRA Withdrawals Can Be Costly

It is received wisdom that the objective behind an IRS is to build that nest egg for the future. Nonetheless, it is not uncommon, especially in the wake of recession, for many taxpayers to tap into this money to help sustain themselves. Unfortunately, early IRA withdrawals carry severe tax penalties. While tax professionals like CPAs and enrolled agents understand the tax implications of IRA withdrawals, taxpayers are often oblivious to these implications, a reality that underscores the value of seeking advise from a registered tax agent before considering such a move.

Below are some of the more pertinent facts around IRA withdrawals that tax professionals will encounter in most standard tax CPE courses. These facts and tips should be part of any obligatory conversation between tax professional and client who is investing in IRAs.

What is Considered an Early IRA Withdrawal?

Any withdrawal from an IRA before the age of 59 and A� is considered an early withdrawal, and will result in tax penalties. However, once a taxpayer turns 59 and 1/2, they are entitled to an unlimited number of withdrawals penalty-free until the age of 70 and A�. At this age, penalties kick-in once again.

Taxes and Penalties

Unless taxpayers qualify for a special exemption, each early withdrawal is subject to a 10% tax penalty. In addition to that flat penalty, they are required to pay income taxes on the money withdrawn from the IRA.

Qualified Distributions

There is a silver lining. This comes in the form of tax laws that entitle taxpayers with IRAs to penalty-free withdrawals in certain situations. These instances are known as qualified distributions, and were envisioned as a way of assisting taxpayers confronting special financial situations. If a taxpayer’s Roth IRA has been open at least five years, distributions can be taken both penalty and tax-free.

Below are the various options for taking a qualified distribution available to IRA holders.

Medical Expenses

Most withdrawals made for medical expenses are subject to all penalties and fines with one exception: If the amount of medical expenses paid by a taxpayer exceeds 7.5% of the adjusted gross income, IRA withdrawals may be penalty free.

College Expenses

Early withdrawals used to cover higher education expenses are not taxed.

Unemployment Health Care

Taxpayers receiving unemployment payments for 12 weeks or more, and who may need money to offset health insurance premiums, are eligible a special exemption.

Active Military Exemption

A military reservist who has been active for 180 days can make early IRA withdrawals without incurring any IRS penalties.

Disability Assistance

Account holders who are mentally or physically disabled, and, as a result, are unable to sustain a job or conduct business, can take qualified distributions, but the disability must be long-term.

Estate Beneficiary

Withdrawals by an account holder’s beneficiary after their death are exempt from the penalty tax.

First-time Homebuyer

First-time homebuyers are permitted to withdraw up to $10,000 from an IRA penalty-free. The IRS defines first-time homebuyer as a taxpayer who has not owned a home in the past 3 years.

IRS Exemption

If the event that IRS withdraws money from a taxpayer’s IRA to pay a tax levy, the 10% penalty is not applied.

Given the sheer number of applicable scenarios, it is always wise for taxpayers to consult an IRS enrolled agent or CPA before taking an early IRA withdrawal. This could end up saving them a bundle.

Substantially Equal Periodic Payments

One alternative to searching for qualified distributions (a topic often covered in most tax continuing education courses) is taking Substantially Equal Periodic Payments (SEPPs). This option allows taxpayers to take periodic payments from an IRA without having to pay any penalty.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

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Psychology Continuing Education: Beyond Graduation

Psychology Continuing Education: Beyond Graduation

For a psychologist, the learning doesn’t stop when you walk away with the degree in hand. In fact, in any field of science, learning is a lifetime experience. Not only because there is such a wealth of knowledge already out there, but also because new research changes the game on an every-day basis. When it comes to psychology, continuing education is more than a requirement for continued licensing; it is a necessity to be the best possible practitioner and therapist you can be.

In psychology, continuing education is often best applied by doing in on a regular basis. Never stop learning, a wise man once said. And that is usually the best approach. Not everything has to be from an accredited institution. By studying on a regular basis and setting time aside to further your knowledge of a given subject, you will be constantly adding to your own understanding of a concept. This is invaluable as you attempt to utilize and implement that information into your own unique brand of therapy. They say that no two therapists will give the exact same advice to a patient. This is true because we each bring our own set of sensibilities and experiences to every situation. But knowing what other therapists are doing will only strengthen your own practice.

Psychology continuing education is a requirement in many states, of course. And where it isn’t a requirement for continued licensure, it may be required by your particular employer. When it comes to obtaining CEUs, you need to make sure the institution providing the coursework is approved by the state and that the credits you earn will count towards your renewal. The bar for these CEUs is typically not very high. In many states, the requirement is only twenty coursework hours every two years. The bar associations understand that a psychologist is often a very busy individual and does not want to burden them with unrealistic levels of work. The state may also require a certain number of hours be towards a specific subject, such as ethics or drug abuse.

Today, you have a number of options when it comes to psychology continuing education. Online courses are available in nearly every subject and sub-subject you can imagine. DVD courses are available from the APA and other learning institutions. Seminars and weekend workshops are given around the country for those who prefer to learn while surrounded by other intellectuals. Find your preferred method of learning and amassing those credits will be that much easier.…