Thinking of taking an early withdrawal from your IRA or retirement plan? In many cases, doing so triggers an added tax on top of the income tax you may have to pay. Here are a few quick facts you should know about taking an early distribution:
- Taking money out of your retirement plan before the age of 59½ is considered an early withdrawal.
- When taking an early withdrawal, you must report it to the IRS and it is subject to a 10 percent tax. A Form 5329 should be filed with your federal tax return.
- The added 10 percent tax does not apply to nontaxable withdrawals. A rollover is a type of nontaxable withdrawal.
- There are many exceptions to the 10 percent tax that you can use instead such borrowing from your 401K as opposed to withdrawing, or beginning substantially equal periodic payments from your IRA.
File your taxes with MPA. Our tax professionals are qualified to handle any early retirement situation. Schedule your appointment today.