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#1362850 - 03/24/10 02:17 PM IRA W/D for Student Loan
Lady Vols Fan Offline
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Joined: Jul 2009
Posts: 81
I have a customer that is wanting to make an IRA withdraw to pay off a student loan. Will there still be an early withdraw penalty if the customer has documentation that is what the funds are being used for?

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#1362994 - 03/24/10 03:59 PM Re: IRA W/D for Student Loan Lady Vols Fan
nbk2yj2 Offline
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Joined: Aug 2006
Posts: 629
Paradise!
A W/D used to pay a student loan that was used to pay for higher education expenses would fall under the exception to the early distribution tax of 10%.

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#1363165 - 03/24/10 06:07 PM Re: IRA W/D for Student Loan nbk2yj2
BrendaC Offline
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Joined: Sep 2001
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Sweet Home AL
Whether you assess the bank's early withdrawal penalty is your decision, based on your disclosure to the customer. Whether he pays an IRS penalty is between him and the IRS.
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Life without Jesus is like an unsharpened pencil - it has no point.

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#1363487 - 03/24/10 09:54 PM Re: IRA W/D for Student Loan BrendaC
nbk2yj2 Offline
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Joined: Aug 2006
Posts: 629
Paradise!
I was speaking of the IRS penalty and the guidelines for exceptions(higher education expenses) We will still report it as early W/D and the burden of proof will lie with the IRA participant to provide the necessary documentation needed for the exception.

I realize any early W/D penalty such as an early withdrawal from an IRA CD would not have anything to do with IRS.

Thanks

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