IRA to pay IRS and bills?

iVillage Member
Registered: 08-17-2005
IRA to pay IRS and bills?
4
Wed, 08-17-2005 - 10:04pm

I started my own business about a year ago which is commission based. Whenever I get a check, I'm already figuring out how it's going to be spent. I have about $12,000 in credit card debt (including a $4,000 dental bill) and owe the IRS and my state dept of taxation a total of about $12,000.

I've recently started to rebuild my credit and have successfully increased it by about 50 points in the past 6 months by paying at least the minimum on time. I'm very nervous I won't even be able to pay my minimums in the next 2 months or so. My accountant has suggested I take $20,000 from my IRA and he would apply to the IRS so that I would not have to pay the 10% penalty. If I'm able to pay off the high interest credit cards, I'll at least have funds available to pay the IRS and my state taxes.

Question: Might it be worth it to me to use this money to pay the bills? I'd be interested to hear anybody's opinion.

Thx

iVillage Member
Registered: 03-22-2005
Wed, 08-17-2005 - 10:16pm

Ummm... I am not familiar with not having to pay the 10% penalty if you apply your IRA money for tax payment. Is it a ROTH or a conventional IRA?

The second quesiton is, how time consuming is running your business? Is taking up a second job an option, just a while, to pay off some of the bills?

iVillage Member
Registered: 08-17-2005
Thu, 08-18-2005 - 7:10am

Thanks for the quick reply -- all good questions. It's a conventional IRA but he said he could apply for a "hardship" something-or-other. Becuase of the new business, my income this year will be about three times my debt. I have the type of job where I need to be around and flexbile -- although I guess a second jot is not totally out of the question.

What a pain :-(

ibk

iVillage Member
Registered: 08-19-2003
Thu, 08-18-2005 - 7:56am

I personnally pretend our retirement account do not even exist. So I would never touch mine. When you say you cannot afford the minimums, does that include just cc minimums or is that an IRS payments also?

If your credit is decent enough, I would get a low interest credit card and surf the IRS debt to a cc. I would then go out and get a part time job and apply that money directly to the cc debt.

Shannon

Shannon


Pregnancy%20ticker
iVillage Member
Registered: 03-22-2005
Thu, 08-18-2005 - 8:36am
Or instead of taking the money out right from your IRA, is it set-up in a way that you can borrow from it (which seems to be a compromise - at least you are paying yourself interest)?