Information from irs.gov
You may have the need to take money early from your IRA or retirement plan. This can trigger an additional tax on top of the income tax you may have to pay. Remember the following when taking an early distribution:
- An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.
- If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out and i it was an early withdrawal, you may have to pay an additional 10 percent tax.
- The additional 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan — your cost includes contributions that you paid tax on before you put them into the plan.
A rollover is a type of nontaxable withdrawal and occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.
4. If you took an early withdrawal last year, you may need to file Form 5320, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax return.
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