Is an early distribution from a retirement plan taxed?
There is an additional 10% tax (in addition to income tax) on certain early distributions of retirement plans. The 10% tax is reported on the Form 1040. Early distributions are distributions that an individual receives from a qualified retirement plan or deferred annuity contract before reaching 59 1/2 years old. A qualified retirement plan is: • A qualified employee plan such as a 401(k) plan • A qualified employee annuity plan under section 403(a) • A tax–sheltered annuity plan under section 403(b) for employees of tax–exempt organizations or public schools • IRAs (other than an education IRA) If an individual takes an early distribution (within the first two years of participation) from a SIMPLE IRA plan, the additional tax is 25%. There are exceptions to the 10% penalty: • Distributions to a beneficiary or estate on or after a taxpayer’s death • Distributions made because of a total and permanent disability • Distributions made as part of a series of substantially equal periodic pa
