How are distributions from a SIMPLE IRA plan taxed?
A. Generally, distributions from a SIMPLE IRA plan are taxed under the rules applicable to IRAs. Distributions from IRAs are taxable as income when taken and may also be subject to a 10% penalty if taken before age 59. However, for SIMPLE IRAs, a 25% early distribution penalty applies to distributions taken prior to the two-year anniversary of the first contribution deposited into the account (unless the employee is age 59 or older or another exception applies). After the two-year period, the penalty is reduced to 10%. Direct rollovers may be made from one SIMPLE IRA account to another without incurring income taxes. Q. A customer was employed by an employer that maintained a SIMPLE IRA plan. His employer has subsequently terminated his SIMPLE IRA plan. He would like to consolidate his retirement assets and wants to know if he can make Traditional IRA contributions to his SIMPLE IRA. A. No, he cannot make Traditional IRA contributions to his SIMPLE IRA. A SIMPLE IRA can only receive co
