Is it possible to borrow money against an IRA or retirement annuity to payoff a huge IRS/FTB tax bill without being hit with withdrawal taxes?
It seems the cycle each year is continuous, I'm retired, do not work or own property so now I owe taxes each year. I've withdrawn from my IRA for taxes the last couple of years but my adjusted gross income never goes down and I'm taxed and taxed like a vicious cycle. Can I ever get out of owing taxes while still trying to survive in a pension which is taxable too? What a nightmare. How do I get out of this cycle? Are there loans available to ease some of this stress? Thank you
Hi - First off, you don't want to borrow money to pay your taxes. - that is a near sure road to an unhappy outcome. Secondly, you cannot borrow against (use as collateral) the money in an IRA or an annuity. The only way to use the money in an IRA or an annuity is via a withdrawal. I will assume here that your IRA contains only pre-tax money which means that every withdrawal adds to your taxable income. You can't avoid paying taxes on the IRA, but you can have the company that holds your IRA withhold income taxes on your withdrawals - they will send the money to the IRS for you.. By doing so, you will have already paid at least some of the income taxes that will be due when you file your tax return. You can do the same with your pension - the pension plan will withhold the amount you specify and send it to the IRS. Between withholding from your pension and withholding from your IRA withdrawals you should be able to have your taxes paid when you file. By "paid" I mean that you won't have to write an additional check to the IRS with your return. Your best bet to make this work for you would be to find a CPA in your local area.. Good luck! | 06.29.15 @ 23:12