The Possible Tax Impacts Of Early Distribution From Retirement Plans
Quite a number of people do not realize the effects of an early withdrawal of money from their retirement funds. They do not actually feel the impact immediately, but it always shows when a tax return if filed.
If you want to know what the IRS perceives about this kind of situation, here are 10 truths.
1. If you receive any modes of payment from your retirement plans before you are 59 ½ years it will be reflected as early distribution.
2. A further 10 percent tax will be subjected against this kind of withdrawal.
3. Any time you make a withdrawal from your early retirement plan you are required to inform the IRS about it.
4. If you roll over to a different IRA or another certified retirement plan, you must complete it within 60 days in order for you to avoid the extra 10 percent tax.
5. You can only be taxed when the new plan sends the distribution to either you or your recipient.
6. Your nondeductible contribution put into an IRA will not be taxed, even if you decide to distribute any amount of that nondeductible contribution.
7. An early distribution from a Roth IRA that is featured in your previous contributions is not taxable.
8. An after-tax employee contribution made to the plan is the only thing that, will exempt you from taxation of early distribution receivable from any other certified retirement plans.
9. If you make a withdrawal from any of your retirement plans for purposes of purchasing a first home costing up to $10,000, for medical and educational expenses then the 10 percent tax will not apply to the distribution. Furthermore this rule applies to a totally and permanently disabled individual.
10. If you need any more assistance or information regarding the above listed things, you may purchase the 575th IRS publication or the Individual Retirement Arrangements. You can also do so through the Pension and Annuity Income and Publication 590. Additionally, visit www.irs.gov or just make a phone call to 800-TAX-FORM (800-829-3676).