Who is responible!

[Chublacka]

What is the name of your state (only U.S. law)? Maine
Received letter from IRS for 2008 taxes where I had to cash in my IRA to live on while unemployed. My CPA claimed it as a hardship on the taxes and now the IRS is saying it wasn't. Who should pay? My CPA for filling my taxes falsely, or am I to pay?

 

[antrc170]

You are ultimately responsible for your taxes.

 

[FlyingRon]

Hardship distributions aren't exempt from taxation. Certain ones may be exempt from the 10% penalty.

As stated, YOU are responsible for paying taxes. You might hold your CPA responsible for paying any penalty the IRS levies for not making the right filing in the first place and some will be gracious enough to pay the interest, but the base tax (and interest) is your responsibility.

I think you should find a new CPA. While losing your job may be a hardship to you, as far as the IRS is concerned only certain items qualify as being eligible for hardship distributions. Unless this was a Roth, you owed taxes on it hardship or not.

 

[davew128]

While losing your job may be a hardship to you, as far as the IRS is concerned only certain items qualify as being eligible for hardship distributions.

There is no such thing as a hardship IRA distribution for tax purposes and no exception from penalty due to "hardship". Unless there is some OTHER qualifying reason for a penalty exception not apparent here, being unemployed in and of itself is NOT an exception to the penalty.

If the CPA reported it as nontaxable or simply didn't report, that CPA should be held responsible for associated interest and understatement penalties but not the tax itself.

 

[George1776]

What is the name of your state (only U.S. law)? Maine
Received letter from IRS for 2008 taxes where I had to cash in my IRA to live on while unemployed. My CPA claimed it as a hardship on the taxes and now the IRS is saying it wasn't. Who should pay? My CPA for filling my taxes falsely, or am I to pay?

You can either a) pay b) tax court after (a) you can ask for a refund & then take it to district court if you wish....

who should pay has been explained

 

[FlyingRon]

There is no such thing as a hardship IRA distribution for tax purposes and no exception from penalty due to "hardship".

Certain of the things that are deemed hardships are also exempt for the early distribution penalty.

Unless there is some OTHER qualifying reason for a penalty exception not apparent here, being unemployed in and of itself is NOT an exception to the penalty.

That is true.

If the CPA reported it as nontaxable or simply didn't report, that CPA should be held responsible for associated interest and understatement penalties but not the tax itself.

Certainly the penalty. He had use of the money so he's not technically out the interest as damages though most reputable tax preparers will cover this as well.

 

[LdiJ]

You can either a) pay b) tax court after (a) you can ask for a refund & then take it to district court if you wish....

who should pay has been explained

I am sorry, but where does this keep coming from? Someone cannot go to either tax court OR district court unless they have a viable case under the tax code.

 

[davew128]

Certain of the things that are deemed hardships are also exempt for the early distribution penalty.

Let me repeat myself: There. Is. No. Such. Thing. As. A. Harship. For. Purposes. Of. An. IRA.

 

[davew128]

I am sorry, but where does this keep coming from? Someone cannot go to either tax court OR district court unless they have a viable case under the tax code.

Well in this instance the OP could litigate the IRS assessment (and would lose) but at least theoretically, one could pay the tax AND choose between District Court or the Tax Court. In that regard Georgie there is right.

 

[terminatedone]

How to Take an IRA Hardship Withdrawal | eHow.com


please review all information before stating that bogus information.(DaveW) you can take a hardship withdrawl but you still have to pay taxes. as for the early withdrawl penalty, you can get around that only if it qualifies for a hardship**************..like unpaid medical bills, prevent foreclosure and so forth.

 

[FlyingRon]

Let me repeat myself: There. Is. No. Such. Thing. As. A. Harship. For. Purposes. Of. An. IRA.

Without the dots, let me repeat myself, certain things the POSTER regarded as a hardship are exempt from the early distribution penalty. Yes, the term hardship doesn't apply to an IRA because you can always take your money out (subect to tax and penalty). A formal hardship only matters to a 401(k) (and similar plans) where they don't have to let you take your money out arbitrarily.

 

[davew128]

please review all information before stating that bogus information.(DaveW)

The only bogus information comes from you. The beneficiary of an IRA can ALWAYS take a distribution ANY TIME THEY WANT. The ehow link is 100% WRONG. It gave instructions for a harship distribution from a QUALIFIED EMPLOYER PLAN, which since you didn't figure this out (stunning I know) is NOT an IRA.

Moreover, the exceptions to early distribution penalty for an IRA and a qualified employer plan are also NOT THE SAME.

Bottom line, do everyone a favor and stop posting bogus info.

 

[davew128]

Without the dots, let me repeat myself, certain things the POSTER regarded as a hardship are exempt from the early distribution penalty.

Being unemployed in and of itself is NOT a hardship considered an exception to penalty. There is nothing else in the OP's message to say an exception exists.

 

[Zigner]

http://www.irs.gov/retirement/article/0,,id=162416,00.html#7

Straight from the horse's mouth.

And, while not specifically stated, if the OP had used the money to pay to avoid foreclosure, it could be considered a hardship. When one is unemployed and needs cash, that is often one of the reasons why

 

[FlyingRon]

Being unemployed in and of itself is NOT a hardship considered an exception to penalty. There is nothing else in the OP's message to say an exception exists.

Never said it was. If you go back and read my first response rather than the meaningless snipping that followed, I pretty much said "while being unemployed may be a hardship to you..." , that he owed taxes on the non-Roth style accounts always, and that only certain items were exempt from the penalty.
Can't say one way or another if part of the distribution was used for these purposes or not, but yes you are right "to live on" doesn't qualify.