AboutHelen P. O`Planick, EA Expertise I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.
Experience I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.
Organizations National Association of Enrolled Agents
Publications I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.
Question QUESTION: I'm looking into taking an early distribution from my SIMPLE plan for use in purchasing a home. My questions are: I am a co-purchaser and it's the first home purchase for me but not the other purchaser - is this okay?; also, what do I need to show as "proof" that the distribution is for a home purchase?; does the money need to be used directly in the home purchase (as down-pmt) or can it be used to repair and/or furnish the home?; and finally does it make any difference if I roll my SIMPLE funds into a traditional IRA and then request a distribution or not?
Thank you in advance for your help! :-)
ANSWER: A SIMPLE is an IRA, so you would not pay the penalty on the first 10K as a first time homebuyer. As long as the money goes into your new home, WITHIN 120 days after taking it out, you are okay.
Helen, EA in PA
---------- FOLLOW-UP ----------
QUESTION: Does it matter how the money goes into the home (as in, can I use it to furnish areas of the house)?
Answer Per IRS rules, it must be to "You use the distributions to buy, build, or rebuild a first home."
So no to furnishings. If your closing costs and construction costs are less than 10K, that is all you can take without penalty.
