Ask The Expert #2
Q. I’m thinking about taking $60,000 out of my IRA to pay off my house. Is this a good idea?
A. You should consider taking out part of the money this year and the remainder in January. By splitting into two different years, you may be able to keep it all in a lower tax bracket. As an example, if you took it all out in one year you paid $30,000 in the 12% bracket and $30,000 in the 22% bracket your taxes on it would be $10,200. But if you were able to keep all of it in the 12% bracket by splitting the years, your taxes on it would be $7,200. In this case, you would save $3,000 in taxes.
Q. I got a phone call from someone who said they were the IRS that said if I didn’t pay tax money owed they would throw me in jail. How do I know if it was the IRS?
A. First of all, the IRS never calls you up and tells you they are going to throw you in jail, that was a scam. If you owe money to the IRS, they will send multiple letters before they file a lien or levy. If you have gotten a letter from the IRS stating that you owe money, there will be a phone number on the letter for you to call them. You can also have a tax professional contact the IRS for you if you would prefer not to deal with them.
Q. The IRS has charged me penalties. Do I have to pay the penalties?
A. That depends on many factors. I could write a book on that subject. There isn’t one answer for everyone who the IRS has charged penalties. I would advise you to contact a tax professional to see if they could get the penalties abated.
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