Because savings in qualified retirement plans and IRAs is meant for retirement income, early distributions
can be penalized.
M2 EQUITYBITES-December 20, 2016-Five Eaton Vance funds announces early distributions
The amounts an individual withdraws from a retirement plan before reaching age 591/2 are called early distributions
Once you pass 59%, you can take IRA withdrawals without owing a 10% fine for early distributions
The exceptions to the tax on early distributions
also differ depending on whether the money is withdrawn from a qualified plan or an IRA.
Contessa's creative Chapter 11 plan permitted qualified creditors to stipulate their claim amounts in exchange for early distributions
in December 2011.
When additional taxes on certain distributions may apply (including the tax on early distributions
and the tax on excess accumulation).
In addition to obtaining home equity loans, families with special needs children often take early distributions
from their retirement plans, IRAs, and annuities to finance their medical expenses.
Although they can withdraw funds from their IRAs, include the distribution in income, and then claim a charitable deduction, younger taxpayers (under age 59Vi) who may have substantial IRA balances have a further disincentive to contribute any of the IRAs to charity because of the 10% penalty on early distributions
Certain early distributions
are subject to an additional tax.
However, amounts distributed prior to age 59V are considered early distributions
and are subject to a 10-percent-penalty tax.
Regularly calculated tax for AMT purposes excludes certain taxes including: (1) the alternative minimum tax; (2) the tax on benefits paid from a qualified retirement plan in excess of the plan formula to a 5% owner; (3) the 10% penalty tax for certain premature distributions from annuity contracts; (4) the 10% additional tax on certain early distributions
from qualified retirement plans; (5) the 10% additional tax for certain taxable distributions from modified endowment contracts; (6) taxes relating to the recapture of the federal subsidy from use of qualified mortgage bonds and mortgage credit certificates; (7) the additional tax on certain distributions from education IRAs; and (8) the 15% additional tax on medical savings account distributions not used for qualified medical expenses.