Pay No Penalty on 401K Money

[firstenrgy]

TweetIn difficult times, many people make early withdrawals from their 401K or IRA accounts. There is a 10% penalty for doing so and then the amount withdrawn is counted and taxed as ordinary income in the tax year withdrawn.
There is an IRS form that you fill out that expempts part or all of the money withdrawn. There is forst time home buyer... so many others but the one that I want to discuss is medical expenses. Most of you are thinking I didn't have any medical expenses but you did. This includes copays deductables and lets not forget items like tylenol, ibuprofen, cough medicne...
My friend has a wife and three kids. Just by looking on his amex bill, he had over $4,200 charged to his amex card from his local CVS. This is a legit expense and expemted $4,200 of the $10,000 he withdrew from the 10%penalty.
Just keep in mind that in the event of a corespondence audit (were they don't invite you down to audit your whole return, they just call you on the phone to ask some questions). One of the questions would be "do you ever purchase groceries or alcohol while shopping at your local pharmacy" The answer is NO!!!
Just a little help for you guys and gals

[JsJs24]

TweetI'd be careful claiming stuff purchased at the pharmacy that wasn't for medical if a credit card was used. If ever audited that could haunt you. I used the exemption for first time home buyer on a Roth IRA I had. Good post.

[daved150]

Tweetgood info....thanks firstenergy