A few months ago, I took out $250 from my Roth IRA and $250 from my Traditional IRA. Most of this was earnings, not just contributions. I realized I didn’t really want these retirement accounts and withdrew the money without setting aside any for taxes. Now, I’m in a tricky spot because I don’t earn enough to file taxes normally. Do I still need to pay the 10% penalty for each amount? Or is there some other process? I tried searching for answers but came up empty.
You’ll need Form 5329 for this. You can file it on its own if you don’t have to do a full tax return. It’s the form to report an early withdrawal and figure out the penalty.
More info:
@Conley
Do you have a rough idea of what I’ll owe in New Jersey? Trying to figure out the total, including state and federal taxes.
Fallon said:
@Conley
Do you have a rough idea of what I’ll owe in New Jersey? Trying to figure out the total, including state and federal taxes.
I’m not too familiar with New Jersey’s requirements. For federal, it’s 10% of the full amount from the Traditional IRA and 10% on the earnings from the Roth. You need to know how much of the Roth was from contributions versus earnings.
@Conley
Just to clarify, if you had gambling income (even if it wasn’t that much) and you can be claimed as a dependent, it might push you over the $1,300 threshold for unearned income, which means you’d need to file.
Conley said:
@Mal
Got it! That information wasn’t given earlier when I replied.
Yeah, they mentioned gambling and being 21 in a reply to another comment, so I thought it was important to bring it up.
Conley said:
@Conley
Quick question: how old are you?
I’m 21. Bad choice on my part due to a gambling problem. Now I need to figure out my taxes.
Conley said:
@Conley
Quick question: how old are you?
I’m 21. Bad choice on my part due to a gambling problem. Now I need to figure out my taxes.
The reason I asked is because if you were over 59 1/2, the penalty wouldn’t apply. Since you’re younger, you’ll need to pay it.
@Conley
Got it! When should I file this form, and how long until it shows up on my IRS account to pay it off?
Fallon said:
@Conley
Got it! When should I file this form, and how long until it shows up on my IRS account to pay it off?
You can file the form anytime between January 1 and April 15, 2025, after the 2024 form is released.
Conley said:
@Conley
Quick question: how old are you?
I’m 21. Bad choice on my part due to a gambling problem. Now I need to figure out my taxes.
Are you sure you don’t have to file a return? Did you have any gambling winnings (even if not huge)?
@Mal
I lost most of it, and my winnings didn’t even hit a few thousand. My state’s threshold is $10,000, and I’m way below that.
Fallon said:
@Mal
I lost most of it, and my winnings didn’t even hit a few thousand. My state’s threshold is $10,000, and I’m way below that.
Were you a student in 2024?
If so, you might need to file due to unearned income if you’re claimed as a dependent.
@Mal
Yes, I’m a student, and my dad does claim me on his taxes. I thought I needed $10k to file, but now I’m reading unearned income is different. Do I still have to file if he claims me?
Fallon said:
@Mal
Yes, I’m a student, and my dad does claim me on his taxes. I thought I needed $10k to file, but now I’m reading unearned income is different. Do I still have to file if he claims me?
You have a federal filing requirement. Check Chart B in the 1040 instructions: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=10 . Keep in mind the unearned income limit is $1,300 for 2024.
You’ll need to file a tax return, even if claimed by your dad. Make sure to check the box that shows you’re a dependent. You might owe extra tax along with the 10% penalty. You’ll also have to report all your gambling winnings, even if you later lost it. You can only deduct losses up to what you won.
Conley said:
@Conley
Quick question: how old are you?
I’m 21. Bad choice on my part due to a gambling problem. Now I need to figure out my taxes.
Don’t be too hard on yourself. Many people dip into IRAs early. Just remember to file that form by April 15 (once the 2024 version is out) and try to pay as much as you can.