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  1. #1
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    Jul 2020
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    Default Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    My question involves labor and employment law for the state of: WISCONSIN

    I'm trying to determine if IRA withdrawals taken as periodic payments under IRS Rule 72t affect Pandemic Unemployment Assistance (PUA) benefits in Wisconsin. I'm self employed and am eligible for PUA. I see that retirement payments can reduce benefits, but the Wisconsin statutes Chapter 108 seem to indicate the state would only be concerned with base-period wages for an employer I worked for during my base period. I left my employer that had the 401k six years ago and the funds were rolled over to an IRA at that time. They were then rolled into an insurance company a year or so later for the purposes of a 72t. My base period for PUA is 2019, so it appears there should be no reason to even report these withdrawals.

    I keep seeing advice being given on forums that IRA withdrawals are not considered income but rather withdrawal of savings and that they are the best and only way to be sure you don't have to report the pension payments. Is this true?

    My concern is that if I blindly report them, the state will be taking months to adjudicate something that wasn't even necessary to report in the first place. It's almost impossible to get an informed answer ahead of time by phone and that wait period is destructive to my situation.

    Can someone give perspective or perhaps emphatically state one way or another?

    Thanks so much for any guidance.

  2. #2
    Join Date
    Sep 2010
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    19,744

    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    It shouldn't affect PUA. It can reduce your Wisconson UI payments.

  3. #3
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    Jul 2020
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    But PUA is predicated on getting $1 from Wisconsin in UI. It's built on their UI reporting system and uses the same rules. Can an IRA reduce UI payments in Wisconsin if the statutes require a base-period employer connection? Isn't it a non-issue once the funds were rolled over and certainly a non-issue since my base period as a SE individual is 2019 and the employer was six years ago? Thanks

  4. #4
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    Quote Quoting wiscon
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    Is this true?
    Yes.

    401Ks = bad because you have to know the rules. IRAs don't count in any state so you don't have to do any research at all. Therefore, trustee-to-trustee transfer 401K to IRA, and then withdraw from the IRA. Problem solved. You reference "income." It's still income for income tax purposes, but it is not a "pension" that requires reporting or risk of offset to your UI benefits.

  5. #5
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    Jul 2020
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    8

    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    Thank you so much for that clarification. I have been going in circles trying to sort this out. I guess it's hard for me not to view it as income casually because it is substantial compared to what I'm claiming for PUA and shows up every month as a SEPP payment.

    Just to be clear, when they ask you on the weekly claim form for other income of any kind, under threat of fraud and retraction of funds with penalties, would you (a) not even list it knowing full well it's a non-issue or (b) list it and let them know so they can tell you it's a non-issue? In other words, is there any need to "confess" it to have it "blessed" or can I safely self certify. The page that says to report any other income does have the wording "if you're unsure how to report it," so that seemed like my out if I was sure. I'm also afraid that when a 1099 shows up next January that they may investigate and cause trouble then. Yet if I willingly report it, I'm throwing my life into an unnecessary tizzy due to the ramifications of the delay it may precipitate.

    Also, I was wondering if you could shed light on a discomforting statement in the DWD guide that make me wonder about the IRA situation:

    "Retirement Pay Reduction

    You must tell us if you have applied for or are receiving any type of retirement payment. Retirement payments include periodic (such as monthly) and lump sum payments from retirement plans, pensions, annuities, 401(k)’s, 403(b)’s, 457(b)’s, as well as Railroad Retirement Benefits. Social Security Benefits are not treated as a retirement payment.

    If all or part of your retirement payment was funded by one of your base period employers, your weekly unemployment benefit payments must be reduced.

    If you receive periodic retirement payments (such as monthly) from a base period employer, a weekly reduction amount is computed based only on the part of the payment that was funded by the employer. The weekly reduction amount for persons receiving Railroad Retirement Benefits is based on 50% of the payment.

    If you receive a lump sum retirement payment from a base period employer, your unemployment benefit payment will be reduced in the week the pension payment is received based only on the part of the payment that was funded by the employer.

    If you roll the payment into another retirement system within 60 days of receiving it your unemployment payments will not be reduced unless you receive payments after the rollover. You must tell us if you have applied for or are receiving payments from the other retirement account after the rollover. "

    That last line sounds a bit like a 72t. What are they actually looking to catch here if rolling it to an IRA actually ends the scrutiny? This implies something doesn't end at rollover.

  6. #6
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    Quote Quoting wiscon
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    retirement plans, pensions, annuities, 401(k)s, 403(b)s, 457(b)s, as well as Railroad Retirement Benefits.

    If you roll the payment into another retirement system

    Look at the words they use. They are very precise, but note that they never say, "IRA." IRAs do NOT count. IRAs are so common that they'd have spelled it out.

    They are looking for you getting money in your pocket directly from an employer-sponsored plan. The IRA completely breaks that connection. The italicized "retirement plan" is in reference to putting your money into a subsequent employer's plan, not an IRA. Besides all this, you rolled it over 6 years ago.

    https://dwd.wisconsin.gov/uiben/other-income.htm They have a pretty exhaustive list at this link and it does not mention IRA. So, no, I wouldn't report it.

    Also, that part you quoted is prefaced above in the instructions, "you do not report the retirement payment as wages on your weekly claim certifications."

    You should probably talk more about why you want to do a 72t. I researched those and decided it was too much work back in 1999 and if there were any calculation errors, it would be an expensive mistake.

  7. #7
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    Jul 2020
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    8

    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    I've tried twice to reply to this but it disappears. Hope this time works!

    Thanks for clear input. I think I'm satisfied that withdrawals from an IRA are not an issue because there is no longer an employer connection to concern UI, especially in my case where the base period for PUA is 2019 and my last employer was 2014.

    I do wonder though, will the state be concerned, say in January, when a 1099R is filed for my 72t withdrawals? Will that trigger some kind of review where I'd be better off telling them now and clearing the air? I'm really reluctant to confess and needlessly risk months of delays (these payments go back to March and can't wait much longer), but I don't want a gut-wrenching "what if" scenario down the road when the money has already been spent.

    Also, you asked why I wanted a 72t. Mine has been in place for five years and has allowed me to supplement my self-employment as a safety net. I went from a professional salary to a somewhat unpredictable dream job and was able to take the risk due to the steady payments covering my big expenses. I researched it extensively as well and found a company with experience administering them. It's very important that they report the withdrawals with the correct exception code on the 1099. So far so good. It has been a real blessing to allow me to do what I wanted to do.

  8. #8
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    Mar 2012
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    Quote Quoting wiscon
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    I do wonder though, will the state be concerned, say in January, when a 1099R is filed for my 72t withdrawals? Will that trigger some kind of review where I'd be better off telling them now and clearing the air?
    This is very much an it's-easier-to-beg-for-forgiveness-than-ask-for-permission scenario. By the time they ask if they ever do, you'll have long exhausted your UI, and it won't cramp your style. You have all the proof you need to make your case, and you'll deal with it then when it can no longer harm you.

  9. #9
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    Jul 2020
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    I see what you are saying. Thanks again. Is there even a likelihood of them getting a 1099 to trigger the inquiry or would that really only happen when an employer reports a disbursement to an employee, such as a rollover or pension or what have you? I’d have a hard time imagining they would scrutinize everyone’s 1099Rs without an employer disbursement to make them smell blood.

  10. #10
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    Default Re: Do IRA Withdrawals Affect Unemployment (Pua) in Wisconsin

    Quote Quoting wiscon
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    Is there even a likelihood of them getting a 1099 to trigger the inquiry or would that really only happen when an employer reports a disbursement to an employee, such as a rollover or pension or what have you? I’d have a hard time imagining they would scrutinize everyone’s 1099Rs without an employer disbursement to make them smell blood.
    I've never seen anything that makes me think the UI people get them directly. They might get them from the state tax people, but 1099Rs only get issued once a year. Also, it would be impractical to look at all people getting 1099Rs and on UI. I've never gotten a 1099R from a 401K distribution that was directly to me. My 401K distributions were always trustee-to-trustee and may have been coded in a way that wouldn't have triggered anything.

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