Tax Law (Questions About Taxes): Taxes on IRA withdrwal for first ...
Questions:I am a first time home buyer who is eligible for the $10,000 withdrawal from my traditional IRA. I was advised by my IRA administrator that as a first time home buyer, I would not have to pay the 10% penalty, and that I can avoid paying taxes on the borrowed amount if I return the full amount I borrowed within 60 days. I have the following questions about this:
1. Can you confirm that I won’t have to pay taxes if I return the borrowed amount within 60 days?
2. If yes to the above question, and I do pay back the amount I borrowed from my IRA within 60 days, what sort of paper work (IRS forms, etc.) do I need to submit in order to avoid paying taxes on the IRA withdrawal?
Answer:
1. Yes that is correct
2. The distribution and return should be reflected on your 1099-R that you receive. The Administrator should net the distribution with the return if within the same year, so pay it back before December 1st to avoid overlapping the year end. No 5432 form needs to be filed as you paid it back within the 60 days.
http://www.bankrate.com/brm/itax/tips/20030410a1.asp
