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Submitted By: Paul
Answered: April 1, 2014 8:30 am
Answered: April 1, 2014 8:30 am
Is there any penalty for using UTMA funds for sports-related travel expenses?
Uniform Transfers to Minors Act (UTMA) accounts are owned by a minor, even though a parent or other adult acts as custodian. Once the minor reaches the age of majority (18 in most states), the funds belong to him/her. There are no tax penalties for withdrawals for any purpose—before or after the age of majority. However, custodians are subject to legal restrictions on the use of the funds. And financial institutions may impose penalties for early withdrawals from CDs or fees in other situations.
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Tax Glossary
Withholding
An amount taken from income as a prepayment of an individual’s tax liability for the year. In the case of wages, the employer withholds part of every wage payment. Backup withholding from dividend or interest income is required if you do not provide the payer with a correct taxpayer identification number. Withholding on pensions and IRAs is automatic unless you elect to waive withholding.
