10% penalty exception for new business
An unemployed 45 year old client wants to tap his IRA to fund a new business he wants to start. Would this withdrawal meet any special tax or penalty exceptions? Form 5329 doesn’t list this, but is there anything extraordinary I should know about?
Permalink Submitted by Jose Morales on Fri, 2012-12-28 17:40
If taken as a distribution in order to directly receive cash to have on hand, it would be treated as any other distribution and would be subject to the 10% tax penalty as well as being reportable income.What you may be referring to is something called ROBS, or Rollovers as Business Startups. You can read an IRS memorandum on this issue here: http://www.irs.gov/pub/irs-tege/robs_guidelines.pdf
Permalink Submitted by Joe Messina on Fri, 2012-12-28 18:48
Excellent. Thank you.