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This interactive tax assistant tool helps taxpayers understand whether they might have to pay an 10% early withdrawal penalty on their IRA or retirement plan distribution:

Here are links to articles we’ve written about other tax forms mentioned in this video:

IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Article:
Video:

IRS Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts
Article:
Video:

IRS Schedule 2, Additional Taxes
Article:
Video: …(read more)

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Do I meet an early withdrawal exception for my IRA or retirement plan distribution?

Withdrawing money from your IRA or other retirement plan before the age of 59 ½ may result in a 10% early withdrawal penalty. However, there are some exceptions to this rule that allow you to avoid the penalty. Here are some common early withdrawal exceptions that you may qualify for:

Medical expenses: If you have unreimbursed medical expenses that exceed 10% of your adjusted gross income, you may be able to take an early withdrawal without penalty.

Disability: If you become disabled and are unable to work, you may be eligible for an early withdrawal without penalty.

First-time home purchase: You can take a distribution of up to $10,000 from your IRA to purchase your first home without incurring the early withdrawal penalty.

Higher education expenses: If you need to pay for qualified higher education expenses for yourself, your spouse, your children, or your grandchildren, you can take an early withdrawal without penalty.

Unemployment: If you are collecting unemployment benefits for 12 consecutive weeks, you may be eligible for an early withdrawal without penalty.

Substantially equal periodic payments: You may be able to avoid the early withdrawal penalty by taking substantially equal periodic payments from your IRA or retirement plan for at least five years, or until you reach age 59 ½, whichever is longer.

Military service: If you are a member of the military and are called to active duty for at least 180 days, you may be eligible for an early withdrawal without penalty.

These are just a few of the exceptions to the early withdrawal penalty for IRAs and retirement plans. It’s important to note that even if you qualify for an exception to the penalty, you may still owe income taxes on the amount withdrawn. It’s always a good idea to consult with a financial advisor or tax professional before taking an early withdrawal from your retirement accounts to fully understand the potential tax implications.

In conclusion, if you are considering taking an early withdrawal from your IRA or retirement plan, it’s important to determine if you meet any of the exceptions to the 10% penalty. By understanding the rules and regulations surrounding early withdrawals, you can make informed decisions about your retirement savings and avoid unnecessary penalties.