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Old 01-19-2015, 08:36 PM
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Settlement

My mother and father were recently divorced. My father is disabled and has only one leg. He lives on social security disability which is less than what is required to file for income taxes. However, he received 75k in an IRA from my mother as a settlement. He received 26k cash and the rest in an IRA I should say. Everytime he chooses to withdraw a portion of that money he is being taxed a descent amount. Should he file? Would he get a return? Could this jeopardize his ssc disability income? Has anyone ever dealt with anything similar? Thanks for your time!



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Old 01-20-2015, 04:40 AM
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My mother and father were recently divorced. My father is disabled and has only one leg. He lives on social security disability which is less than what is required to file for income taxes. However, he received 75k in an IRA from my mother as a settlement. He received 26k cash and the rest in an IRA I should say. Everytime he chooses to withdraw a portion of that money he is being taxed a descent amount. Should he file?========>>>>I guess so; hwever, it depends.The IRC provides that any amount distributed from an IRA "...shall be included in gross income by the payee or distribute; however, the IRC does provide for an exception; the transfer of all or part of your interest in a traditional IRA to a former spouse, under a decree of divorce is not considered a taxable transfer by changing the name on the IRA or making a direct transfer of IRA assets, so as long as the receiving spouse maintains the funds in the IRA, neither spouse will pay income tax or penalty for early withdrawal.note; there must be a transfer of the IRA participant's interest in the IRA to his or her spouse or former spouse ; such transfer must have been made under a divorce or separation instrument.


Would he get a return?====>>>>>>hard to tell it depends on his personal specific return situation; a tax refund is the result of having taxes withheld on earnings that amount to more than he owes in income taxes for a calendar year. Federal and state taxes are withheld at a specified amount each pay period, and when the year ends, he must file income taxes by submitting the proper filing forms. In many cases, taxpayers have paid more than they were required to pay.

Could this jeopardize his ssc disability income?=========>>>>>>>>it also depends; If you do have other sources of income, a portion of your Soc Sec disability benefits could be taxed, depending on the amount of your other income. In general, the amount of your benefits that will be taxed is based ;as single and your modified adjusted gross income plus half of your Soc Sec dis benefits is more than $25k but less than $34k, then up to 50%of your disability benefits will be taxable. Over $34k, then up to 85%’d be taxable.



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