Ouch!! Has anyone tapped into an IRA for downpayment?

[Caliche]

Apparently  I didnt perform  the proper research before taking a withdrawal from a traditional IRA in 2013 for closing costs.  Maybe it has a lot to do with my single status but that $10,000 distribution is going to cost about $7000 now that tax time is upon us...the CPA just gave me the news today.  Even though your not penalized because  its a first home purchase its still considered income that wasnt taxed.  I have a very simple situation..I'm single, no kids, purchased a home in 2013, received a W2 from my employer for about $80,000, also received a 1099 for some work I did on the side in the amount of $2700 and the form for the $10,000 IRA distribution.  When I enter just the W2 from my employer the computer says I have a refund owed to me of about $2800..NICE!! but when I plug in the $2700 (1099) and the IRA distribution the computer says I OWE $7000.  So I owe a $9800 tax on $12,700  worth of income.  Only the government could get away with such a crime.

[drelldrell]

I prepared a lot of tax returns over the years. Unless ther is something you are not mentioning, that amount of tax is wrong. Get a second set of eyes on your return. Those amounts are questionable. 

[Caliche]

I certainly will get a second set of eyes.  Turbo tax gave me the same number as the tax lady..that's what has me concerned

[StartingOver10]

Did you remember to put in your deductions for closing costs? Even if the seller paid you get the deduction.

Not all tax preparers are the same. No way that extra $12,700 in income should cost you an extra $7000 in taxes

[DallasLoanGuy]

so it put you into a higher tax bracket?

[avv7c0]

I'm with Dallas on this one, the only explanation I see is that you spilled over into the next tax bracket. Being at the lower income level of a tax bracket can be a painful thing. We went from getting a $2000 refund in 2011 too owing $4400 in 2012 due to the same thing. Our income only increased marginally, but it was enough to put us in the next bracket.

[jnc]

I'm no accountant here, but shouldn't a bump into the next tax bracket only effect the taxes on the income above and beyond the previous tax bracket?

It also appears there is only about a 3% increase between those two brackets. I don't see how that could calculate out to 7k, regardless of how much of the income is being effected.

Just my 2c!

-C-

[agekeith22]

  The other issues could be, your AGI with just you W2 could have been low enough to get you the Earned Income Credit, but with the 1099s it could have pushed you over the max income for the credit causing a big uptick in taxes owed.  Then the higher tax bracket...  You could compared the two scenarios on turbotax to see if your credits change, that is where I suspect the difference is.

[madmann26]

According to this, http://www.bankrate.com/finance/taxes/tax-brackets.aspx

You would fall into the 28% bracket. I would get a 2nd opinion on your taxes to ensure that the person that is currently doing them is factoring in everything, including the home purchase fees/interest/etc/etc that you have paid.

You have until mid-April to file anyway, don't rush something like this.

[fungoman]

There is no way those numbers are correct. With what you have provided, you are in the 25% bracket. AGI (excluding 1/2 SE tax deduction) is 92,700 less 10K (Standard deduction and exemption) gives you taxable income of 82,700 which puts you in the 25% bracket. The IRA withdrawal and SE income would be taxed marginally all in the 25% bracket with the above example. You would have to pay SE tax of $381 (2700*.9235*.153), but would also get a deduction for half of that in your AGI (I didnt factor that in). The results are even better if you are itemizing. If you are itemizing you likely owe no money at all and are pretty close to break even. This is based exclusively on what info you have provided. Are you sure you didnt owe 2800 without the IRA and 1099 (12,700) and now owe close to 7k with them in? That would make more sense.