From my research I think we have unknowingly and accidentally screwed ourselves here, but I would like to ask to confirm.
- Oct 2015: Our son needed emergency surgery when we were traveling in Panama and was in the hospital for a week.
- We had to pay before they would discharge him since it was obvious we didn't live there and would be leaving the country soon, so no payment plans allowed.
- We only use two of our credit cards for purchases and pay them off every month. So we charged the bills to the cards and then moved the balance a couple weeks later with 0% balance transfer offers to other cards we never used, thinking we could spread out the load over a year or so and pay it off ourselves over time.
- Looks like we won't be able to pay it all off in time and we considered taking an IRA distribution before the HUGE interest kicks in this November.
- Looks like we should have taken that distribution last year as it appears that IRS requires that it has to be the same calendar year of the distribution and the medical bills.
- So if we can't pay it off we get to choose between ridiculous credit card interest on the remaining amount or 25% penalty for taking a withdrawal that is not exempt.
Am I missing anything here? Seems odd that it would be tied to a calendar year instead of a rolling year. What if this had happened in December and we would have no way to take a distribution before the year ended?
Or can the debt on the credit card still be considered medical bills if we pay them this year with distributions this year? Everything seemed great when our taxes were done this year, but now hours are being cut and we are looking to get hammered here either way.... Tips?
FYI, we are going to attempt to do the "balance transfer shuffle" when we get closer, but that all depends on what kind of balance transfer offers are out there in the future. Will have to wait and see!