Now Safe To Jilt The IRS in 1999?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Curious what people think about this HYPOTHETICAL situation.
Imagine you've got 50k locked up in your IRA. Imagine you sure would like to use that money to buy that rural property, get some needed items for y2k, whatever. You just want that money.
But, of course, you can't touch that IRA, since if you did you'd have to give the IRS almost half of it in 2000 due to your "early withdrawl".
Well, if you really believe that the government records are going to be toast in 2000+, I mean, if you really really believed it, you'd take that money out right now with impunity, right?
I wonder how many have done such a thing. My bet is very few. I bet even the most ardent survivaliss people are relunctant to tangle with the IRS, not to mention those who think it will be serious but not TEOTW.
-- Faithful Loyal Taxpayer (firstname.lastname@example.org), March 22, 1999
I had a similar hypothetical situation involving 25k. I think that if you withdrew the money in 1999, you have to withhold some of the money for those year 2000 taxes. So you would lose some of the money this year. And then there is the danger of the world not going to hell.
-- Frustrated taxpayer (email@example.com), March 22, 1999.
The thought had occurred. You know, this is a great test for how certain one is about the end of the world. Forget moving to Lower Hoghollow, leaving your job, and storing food/ammo - that is EASY. The really brave thing is to take on the IRS. I think you are right. I don't think anyone will go that far until AFTER 1/1/00.
-- BG (firstname.lastname@example.org), March 22, 1999.
You don't have to be a hard-core survivalist or even a TEOTWAWKI believer to "Just say NO to the IRS."
1) Keep getting reamed.
2) Check out and heed http://goodbiz.com/tbks/
-- A (A@AisA.com), March 22, 1999.
TRuE!!!! YoU MUsT HOweVeR Be a foOL WHo iS WiLLinG TO riSk beINg intRODUcED IN thE FUtuRE aS MR buTTsLacK!!!!! thANk yOu nO FoR DIEtER!!!!! hOw siLLy is The riSK To spENd tHE NeW YeAR IN tHe cLinK?????? bE SUrE TO TaKE YoUR "SOaP On a RoPe" WItH YoU!!!!!
-- Dieter (email@example.com), March 22, 1999.
Frustrated Taxpayer, you said
"the danger of the world not going to hell"
A curious phrase...it has a lot of implications...
-- (firstname.lastname@example.org), March 22, 1999.
Think about this...
The penalty for early withdrawal is 10% (not 50%) if your income drops below 20K in Y2K you can claim the Earned income credit and it will wipe out your loss on the 10% you pay in penalties...
Think... You pay the taxes that are due, not any more...
-- helium (email@example.com), March 22, 1999.
IRA's are a toughie. I have one- my ONLY savings, left over from a ten year duration job's retirement plan. Now as a self-employed farmer...ha ha in terms of savings. But- I decided to pay off what remained of my land mortage this year- about ten grand, with part of the IRA. Yes- I'll pay a 10% penalty- but that's no worse than the interest I would have paid on the mortage. I don't however, know if in fact the IRS will be funtional next year so I didn't have them withold the 10% penalty or any taxes. My income is so low that it won't be a major hit anyway. And- my land and home is now paid for. Which makes me feel much better in case of serious disruptions in income, etc.
There's still more $ in my IRA however- and I'm still mulling over what to do. Leave it there and hope it's still accesible in 2000. Take it and use it? I'd like to get another piece of land as well as a team of drafts and equipment- I'd put the money in this if I had it. I'm just watching and waiting at this point.
The dillema of course is that if things go reasonably well- maybe I'll need the money for retirement some day. Also- taking the IRA $ now would be a heavy tax hit if I took it all. But- if i leave it and all hell breaks lose- I'll wish I'd gone and done it. Suggestions anyone??
-- anita (firstname.lastname@example.org), March 23, 1999.
Are you comfortable waiting until August to make that decision? A few more months of information may make the decision easier. If you decide to withdraw, live the thought that 10% was your insurance premium. It's only money.
-- PNG (email@example.com), March 23, 1999.
Ooops, forgot. The tax thing. The IRS are like cockroaches. They'll survive a global thermonuclear war. But y2k will slow them down enough to give you a few years to find a way to "earn" the tax penalty.
-- PNG (firstname.lastname@example.org), March 23, 1999.
AHEM! Might I add something here? I have a Roth IRA (recently converted from a traditional) that is and has been making a pretty little penny every single month. The total dollarage is hovering a little above $3500--not much, I know, but considering I contributed a total of about $400 to that amount way back in 1996 and I am only 27 years old, not bad, either. ANYway, the IRS takes 20% right off the top, thank you. In other words, no matter *when* you take it out in 1999 (unless things already get screwy in which case your money is screwed anyway), they will get their 20% before you get the rest of it. THEN, if the world and the IRS are still functioning come 4/15/2000, you will have to report that other 80% on your income for 1999 and get taxed for it AGAIN. (They bend you over, they do their thing, and they don't even give you a friggin tissue to clean up the mess when they are done with you......sorry to be so graphic, but that's how it feels...I withdrew a teacher retirement thingie a few years back....OW.)
I, by the way, am watching the stock market AND my balance like a hawk (they must think I am crazy calling all the time to check it) and the MOMENT anything looks weird, I am pulling it all out, baby! (MINUS greedy little uncle sam's cut). I am also thinking the IRS will be the least of my worries in the year 2000.
OH! as a by the way, anyone have SAVINGS BONDS???? Any predictions on how worthless those things will be should Y2K be anything above a 4? Got toilet paper?
(I've cashed all of mine in.)
-- Preparing (email@example.com), March 23, 1999.
Without re-reading all the posts, I want to make one correction, and offer one bit of free tax counsel that I think other y2k preparers will be receiving from their tax advisors.
EIC (Earned Income Credit) will not be available on IRA withdrawals, but only on -- da-da da-da! -- "Earned Income", meaning wages and self-employed income. EIC is taken away not so gradually (about 20% rate) from about 13k through the high 20s, so if your IRA puts you up that high, you've lost it. (Also need a kid or two for EIC.)
If you have little other income in 2000, then your IRA won't cost you more in income tax than other income would have done, but "ouch"! on the 10% penalty.
IRA withdrawals have 60 days (be careful on the count) to be re- deposited in another IRA for no penalty or tax on it. A lot of people may try for an early-November withdrawal to see what has happened by the equivalent early-Jan. date.
If the "worst" happens, and you get stuck with a big tax debt and a hungry and somehow-functioning IRS coming to your door, think "Offer in Compromise", where you merely give them your net worth and they may go away.
Dieter's probably had some bad jail experiences somewhere, but IRS debtors' prison isn't one of them, since it doesn't exist.
-- taxman (firstname.lastname@example.org), March 24, 1999.
Enlightenment is a great thing...
The IRS was created to collect taxes to pay interest to the Federal Reserve, a privately held company with the richest of the rich as shareholders. They get to create OUR money out of nothing and loan it to us. Every last tax dollar goes to paying off this monstrosity. Every other governmental requirement for money is paid for by government debt instruments such as bonds and bills. The interest on the bonds and bills can easily be covered by the federal monies invested in commercial equities. The US, state, and local governments account for around 65% of all equities ownership.
It is relevant because both the FED and the IRS need to be abolished for the outrageous instruments of control that they are.
Do your homework and it will do you a world of good.
-- (email@example.com), March 25, 1999.
Assumptions based on assumptions based on assumptions...will get you in big trouble.
Prediction, probability 100%:
There will be an IRS next year and you will have to pay taxes.
-- now that is crazy (firstname.lastname@example.org), March 25, 1999.
Taxman, you said people will be withdrawing IRA in early November and then redpositing once the coast is clear. That has been my thinking, but I was going to wait until December to withdraw. Any TAX reasons that I should do that before December?
-- Puddintame (email@example.com), March 25, 1999.
Puddin: do you REALLY think you are going to do that in Nov? You and 80 million others? Are you crazy? How would that be possible???
-- a (firstname.lastname@example.org), March 25, 1999.
You have the use of your 401K or IRA money for 60 days at which point it must be redeposited or the withdrawal penalty is encorced....no matter what you do with the money after 60 days.
It would be best to roll the IRA into a government bond account as a rollover IRA. If it gets bad, the bonds will be one of the safest investments. If it gets REAL bad, money, bonds, stocks etc just won't matter. Just don't count on being able to cash in the IRA for 3-5 months. It'll take that long for them to straighten out their records. When the markets come back up and begin functioning again (and they will unless it's a 9 or 10) roll the IRA again into a self directed fund and pick an choose the survivors.
I am not a stock broker (and don't play one on TV). Might think about this myself and talk to my CPA.
-- Lobo (Hiding@woods.com), March 26, 1999.
-a, To clarify, I doubt I will take the IRA funds out in cash. Anyone needing cash should go ahead and take it out pretty soon. I think it's best to keep it in a bank safe deposit box unless it looks like things are going to get hairy.
But, back to the IRA, mine is with a broker. I'd rather have the temporarily borrowed funds in a government instrument or even a bank than with a broker. I have a little more faith in the FDIC than in SIPC. Also, I feel that banks are more heavily regulated than the brokers and are less likely to suffer total irreparable database annihilation.
-- Puddintame (email@example.com), March 26, 1999.