How Do You Calculate Taxes & Penalties For Early Withdrawals From Traditional IRA Accounts?
Though the Internal Revenue Service (IRS) allows you to take money out of your traditional IRA at any time, you will usually be charged a 10 percent penalty on any withdrawals before you reach age 59 1/2. The IRS imposes this penalty to discourage people from using traditional IRAs for purposes other than putting aside money for retirement. In addition, since the traditional IRA allows a tax deduction for contributions, the withdrawal is taxed as income. Determine the amount of money withdrawn from your traditional IRA. You will receive a form 1099-R at the end of the year showing the amount of the withdrawal. Determine how much, if any, of the early withdrawal is qualified. Reasons for qualified early withdrawals include up to $10,000 total for a first-time home purchase, medical expenses that are more than 7.5 percent of your adjusted gross income, and money to pay for higher education costs. Subtract the amount of the withdrawal that is qualified from the total amount to find the un
