How Do You Determine Penalties For A Return Of IRA Contributions?
An Individual Retirement Account or Arrangement (IRA) provides investors tax advantages while saving for retirement. Although an IRA provides an excellent method for setting aside money for retirement, several steep penalties exist for not following all rules and regulations in regards to a return (distribution) of IRA contributions. Here are the most common penalties you should keep in mind. Consider your age. If you are younger than 59 and 1/2 years, you may receive a 10 percent penalty for early withdraw of contributions (i.e., early distribution). If you are older than 70 and 1/2 years and you do not withdraw your minimum distributions by April 1st of the following year, you may also owe a 50 percent excise tax on the amount not withdrawn as required. Withdraw any excess contributions and any interest or move the excess to the next year’s contributions before April 15th (or the end of a requested 6 month extension) of the current tax year or up to a 6 percent penalty will be assess
