Q: I have a 401(k) education withdrawal. I was wondering whether I have to pay [a] 10-percent tax on that withdrawal.

–– D.B., Providence

A: Yes, said Bob D. Scharin, senior tax analyst for the Tax & Accounting business of Thomson Reuters. Here’s the deal:

In general, withdrawals from a 401(k) retirement-savings plan are subject to income tax plus a 10-percent “early withdrawal” penalty.

There are some exceptions to the penalty, but the list is short.

For example, you may escape the penalty if you have reached age 59 1/2 , or if you’ve reached age 55 and have “separated from service” (in other words, if you’ve left your job –– maybe to work some place else or to retire).

But there’s no exception to the penalty for education expenses, Scharin said.

A few other points:

•If you withdraw money from an IRA to pay for certain higher-education expenses, you may be able to escape the 10-percent penalty, Scharin said. For this reason, some people arrange to have their 401(k) balances transferred directly to an IRA (through a trustee-to-trustee transfer), then make a withdrawal from the IRA for higher education expenses, he said.

•For more information about the tax consequences of withdrawals from 401(k) and other retirement-savings plans, pensions, or IRAs, see Internal Revenue Service Publications 560, 575 and 590.

For a free copy, visit your local IRS office (at 380 Westminster St., Providence, or 60 Quaker Lane, Warwick), call the IRS toll-free at (800) 829-3676 to have a copy mailed to you at no charge, or download a copy from this IRS Web site:

www.irs.gov/formspubs

Q: On gambling winnings, I know on federal taxes you have to pay taxes on winnings, but if you have losses, that goes against what you pay. . . . . Like if I win $700, but lost $700, it is a wash. Does the same principle apply to state taxes? . . . .

–– R.P., Warwick

A: The tax rules for gambling winnings and losses are tricky.

You can’t reduce the amount of your gambling winnings by the amount of your gambling losses, then report the difference. You must clear some hurdles.

For example, gambling winnings are taxable –– you must report them on your federal income-tax return.

What about gambling losses? You can’t deduct them if you claim the lump-sum deduction known as the standard deduction. (Most taxpayers claim the standard deduction.)

If, instead of claiming the standard deduction, you make a separate list of all your deductions (a process known as itemizing, done on Schedule A of your U.S. Form 1040), you may be able to deduct gambling losses –– but only up to the amount of your winnings. Also, you must have detailed records to substantiate deductions for gambling losses.

Rhode Island follows the federal rules in this regard.

For more information about the tax treatment of gambling losses, see IRS Publication 529. For a free copy, visit your local IRS office, call the IRS toll-free at (800) 829-3676, or use this IRS Web site:

www.irs.gov/formspubs

TODAY’S TIP: You, or someone you know, may be eligible for “extra help” to pay for prescription drug costs under the federal Medicare health insurance program.

In general, you may qualify for extra help — up to $3,600 a year –– if you pass the following tests:

•Your annual income is less than $15,600 if you’re single, or less than $21,000 if you’re married and live with your spouse. (Even if your income exceeds the limit, you may still qualify for at least some help in paying your expenses.)

•Your “resources” are less than $11,990 if you’re single, or less than $23,970 if you’re married and live with your spouse. (Your bank accounts, stocks or other investments count as resources; your house and car don’t count.)

For more information, call the Social Security Administration toll-free at (800) 772-1213, or visit your local Social Security office, and ask for the “Application for Help with Medicare Prescription Drug Plan Costs.” More information is also available online:

www.socialsecurity.gov

To learn more about Medicare prescription drug plans and special enrollment periods, call Medicare toll-free at (800) 633-4227, or use this Web site:

www.medicare.gov

Questions about your money matters? Call us at (401) 277-7484 and leave a message, or e-mail:

moneyline@projo.com

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