https://turbotax.intuit.com It's important to understand the tax implications of withdrawing money early from your retirement accounts. CPA and TurboTax tax expert Lisa Greene-Lewis is here with what you need to know.

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Video Transcript ~ Title : 2022 Tax Tips: A Guide to 401k and IRA Early Withdrawal - Presented By TheStreet + TurboTax
- [MUSIC PLAYING] TRACY BYRNES: All right, so it's inevitable. Life happens and we dip into our retirement accounts. But is it a good idea and are there tax implications? Lisa Greene-Lewis, CPA and TurboTax expert is here with us right now. OK, so what happens if I need the money, Lisa, and I dip into an IRA or a 401 ? LISA GREENE-LEWIS: Yeah, so if you withdraw from your IRA or 401 and you're younger than 59 and 1/2, you will incur an additional 10% tax in addition to whatever your ordinary tax rate is when you file your taxes. TRACY BYRNES: Right, so it's the tax on the withdrawal plus the extra 10%. So you do get dinged twice. Can this affect your Social Security also? LISA GREENE-LEWIS: Yes, a lot of people don't realize this. And they could be younger than 59 and 1/2, and there's people that withdraw Social Security for certain reasons, maybe related to a disability or something like that. If that happens, it could make their Social Security taxable, depending on how much they withdraw. TRACY BYRNES: So if you withdraw before 59 and 1/2 you get this 10% penalty. If you take out this money, though, it could actually bump you into another tax bracket, couldn't it? LISA GREENE-LEWIS: Yes. It could also bump you into another tax bracket, having that additional money on top of, if you have Social Security or you're retired. A lot of people that are retired also do some work on the side or contracting. So it could have an impact on all of that income. TRACY BYRNES: Yeah, so make sure you think twice before you pull this money out. And as a big reminder, there was a little, dare I say, gift that we got during COVID. We were actually able to pull money out, weren't we, without this 10% penalty. LISA GREENE-LEWIS: Yes, without that. And also we were able to pull the money out and not have to recognize it in income in one year. You could divide it among three years. So that's one thing to keep in mind. If you did do that, this would be the second year. So you would just have to make sure you include a portion of that in your income. Now, if you were a previous TurboTax user, it's keeping track of that. And all of that will carry forward when you do your 2021 taxes. TRACY BYRNES: Don't be shocked when that big number shows up that you've forgot about. Because in theory, we pulled it in 2020, right? LISA GREENE-LEWIS: Right. TRACY BYRNES: Right, so it feels like a lifetime ago. All right, think twice before you pull money out of your retirement accounts if you do need it to pay off bills or debt, especially if you are under 59 and 1/2. Lisa Greene-Lewis, thank you so much for taking the time with us. LISA GREENE-LEWIS: Thank you for having me. [MUSIC PLAYING]
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