Surgent's Guide to the Early Distribution Penalty Exceptions for Distributions from Retirement Accounts (IRA6)
Distributions from retirement accounts that occur before the account owner reaches age 59 are subject to a 10% additional tax, unless an exception applies. Eligibility for any of these exceptions is determined by several factors, including the type of account from which the distribution is made. Making a wrong move can result in a retirement account owner losing eligibility for an exception. In some cases, exceptions can only be claimed through proper reporting on the individual's tax return.
- Early distribution penalty
- Exceptions to the age 59½ rule
- Substantially equal periodic payments
- Exceptions by plan/account type
- Transfer and rollover rules and their effects on qualifications for the exceptions
- Claiming the exception when an IRA custodian's tax reporting shows no exception
- The rules that apply to the different exceptions
- Identify distributions that might be subject to the 10% early distribution penalty
- Ensure that clients who qualified for the exceptions do not pay the 10% early distribution penalty because of conflicting tax reporting by IRA custodians and plan trustees
- Understand the tax reporting requirements that apply to early distributions
- Determine suitability for the substantially equal periodic payment program
Financial advisors, tax professionals, and individuals who support IRAs and employer plans (employees of financial institutions who answers questions about and handle transactions for IRAs and employer plans)
Applicable if you are a HSCPA member in good standing.
Applicable if you are not a HSCPA member.