I make about 50k a year.
This year, I inherited a Beneficiary IRA account. Since I need to withdraw everything within 10 years anyway, I decided to start now and withdrew 150k without thinking much about it.
I read online that big changes in income could trigger an audit.
I’m paying 10% plus taxes on this withdrawal.
What’s the risk here? Did I mess up?
I don’t think this will increase your chances of an audit.
> I am paying 10% + tax on this withdrawal.
Inherited IRAs don’t have the 10% penalty, just the income tax.
I wouldn’t stress about an audit. It’s not uncommon to take a large withdrawal like this.
That said, pulling out $150k in one year might not have been the best choice for taxes. If the account has $1M+ it might make sense, but spreading it over 2-4 years could save you money in taxes.
This isn’t something that would trigger an audit. Lots of people have major income changes—new jobs, marriage, divorce, big distributions. As long as you report the income and pay the tax, you’re good.
The 10% penalty doesn’t apply to inherited IRAs. You’re required to withdraw the money, so no penalty there.
Hayden said:
The 10% penalty doesn’t apply to inherited IRAs. You’re required to withdraw the money, so no penalty there.
Oh, I didn’t know that. Thanks for clarifying!
You’re fine. Nothing to worry about.
The chance of an audit is really low, like 1%. Your income increase is pretty straightforward, so the IRS probably won’t flag it.
This doesn’t impact audit risk.
But financially, this move might hurt. With just 10% withheld, you’ll owe around $34k in federal taxes plus $5-10k in state taxes. That’s a big bill.
Audits are only scary if you’ve done something wrong, bro.
An audit isn’t likely, but withholding only 10% might leave you short at tax time.
And even if you do get audited, it sounds like your situation is simple. What would they even look into?
You can roll the money back into an IRA within 60 days to avoid taxes for now. If possible, maybe split it—$75k this year and $75k next year to stay in a lower tax bracket.
Brady said:
You can roll the money back into an IRA within 60 days to avoid taxes for now. If possible, maybe split it—$75k this year and $75k next year to stay in a lower tax bracket.
This is solid advice!
It’s just regular taxable income. Nothing unusual.
If you report everything properly, you should be fine. Even if you get audited, it’s just a matter of providing the right documents.
Audits are more for cases where people try to pull shady tax tricks.
Why worry about an audit if you’ve done nothing wrong? Have you?
Jade said:
Why worry about an audit if you’ve done nothing wrong? Have you?
I think they’re just worried because audits are stressful, even when you’re in the clear.