Can I avoid the 10 percent tax penalty for an IRA withdrawal if I have bipolar disease?

by David S. Markle, CPA | Jan 25, 2018
askacpaicon

I am 52 years old and am permanently disabled with bipolar disease. and I will be on Social Security Disability Insurance (SSDI) for the rest of my life. Will I incur a 10 percent tax penalty if I withdraw $10,000 from my Roth IRA?

Qualified distributions or distributions that are a return of regular Roth IRA contributions are not taxable. So, the total contributions made originally will not be taxable.

A qualified distribution must meet both of the following requirements:

  1. The distribution meets the five-year holding period, which begins in the year of the first contribution.
  2. One of the following must be met:
  • Roth owner has reached age 59 ½
  • Roth owner is disabled
  • Roth owner is deceased
  • First-time home buyer exception

An individual is considered disabled if he can furnish proof that he cannot do any substantial gainful activity because of his physical or mental condition. A physician must determine that his condition can be expected to be of long, continued, and indefinite duration.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: David S. Markle, CPA, is a CPA financial planner with Markle Wealth Management in Danielsville, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search