Members of the Maryland Association of Certified Public...

TAX ANSWERS

March 30, 1995

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: If we take money out of an IRA to make a payment into the state retirement fund, do we have to pay taxes or a penalty on the IRA withdrawal?

A: A rollover is generally a tax-free distribution from one qualified retirement plan to another within a 60-day period. But a transfer from an IRA to make a payment into the state retirement plan is not a permissible rollover. Since this was not a qualified tax-free rollover, the IRA withdrawal is taxable according to normal IRA withdrawal rules and should be reported per the instructions for Lines 15a and 15b of your 1040.

If the withdrawal was a premature distribution (generally before age 59 1/2 ) you may be subject to a 10 percent premature distribution penalty, which is computed on Form 5329. The distribution code on Box No. 7 of Form 1099-R will indicate if you should file Form 5329. Review the instructions for Line 2 of the form to see if any other exceptions to the 10 percent penalty on premature distribution apply.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

To submit a question, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford 836-5028, and in Carroll 848-0338. Using a touch-tone phone, enter 6225 after the greeting. Push 1 to submit a tax question; state the question in full. Push 2 to hear a tax tip. Selected questions will be answered in the Business section. No questions will be answered by phone. Please leave your name and phone number.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.