Tuesday Tax Tips 3/26 @ 5pm

Many people find the need to take an early distribution from their retirement plan. There is a tax impact when you take an early distribution. Here are eight factors about early distributions.

1.    Payments you receive from your Retirement account before you reach age 59 are normally considered "early" distributions.

2.    Early distributions are usually subject to an additional 10 percent tax.

3.    Early distributions must be reported on your Federal and State income tax forms along with your W2 wage income and other kinds of income.

4.    "Rollover" the distribution to another IRA or qualified retirement plan not subject to tax, but the rollover must occur within 60 days after the day you received the distribution check.

5.    If you have made nondeductible contributions to an IRA and later take early distributions from your IRA, the principle portion of the distribution is not taxed.

6.    If you received an early distribution from a Roth IRA, the return of your principle distribution is not taxed.

7.    If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.

8.    There are 10 exceptions to the additional 10 percent early distribution tax, such as purchase of a first home, certain medical or educational expenses, or if you are disabled. 

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