Taking money out early from your retirement plan can cost you an extra 10% in taxes. Taxsmith attorneys and the IRS wants to give you some tips on early withdrawals from retirement plans…
1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.
2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10% tax on your withdrawal.
3. The additional 10% tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.
4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10% tax also does not apply to a rollover.
5. There are several other exceptions to the additional 10% tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.
Tax relief attorneys at Taxsmith are here to answer any and all questions related to the world of tax! We will help you resolve IRS tax debt problems through the expertise of our income tax lawyers. Please contact us directly at or at email@example.com. We look forward to battling the IRS with you as your Tax Burden Rescue Team!