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Posted by Herb Smith on April 15, 2006, 2:28 am
Please log in for more thread options Wally wrote:
> Sorry for cross-posting. Time's running out!
>
> I was laid off in mid-November 2005 and started working
> again in late February 2006. I collected state unemployment
> compensation for exactly 12 weeks beginning 11/27/2005 and
> ending 2/19/2006.
>
> I withdrew $20000 from an IRA during 2005. I'm 50 years
> old, so these were early withdrawals.
>
> I paid medical insurance premiums, through COBRA, of about
> $1000 per month in Dec. 2005 and Jan. & Feb. 2006.
>
> According to page 48 of 2005 IRS Pub. 590, if I collect
> unemployment for at least 12 weeks, I should be able exempt
> the amount I paid for medical insurance from the 10% IRA
> early withdrawal penalty.
>
> My questions are:
>
> Can that 12 weeks straddle 2 years?
>
> Can I exempt $1000 from the 2005 IRA early withdrawal
> penalty on my 2005 tax return?
>
> Can I actually exempt $3000 from my 2005 tax return?
>
> Can I exempt $1000 from my 2005 tax return and $2000 from my
> 2006 tax return?
The penalty exemption only applies to those medical expenses
or premiums that EXCEED 7.5% of your AGI (although you do
not have to itemize to claim this exemption). Only the
amount spent in 2005 is eligible for the exemption, since
that is the year that you withdrew the IRA funds. 2006 would
be a different year and would not be eligible unless you
made another IRA withdrawal in that year.
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