Premature distribution

Premature distribution

A distribution from an IRA before the owner reaches age 59-1/2. Generally, a 10% penalty tax is owed on such a distribution. Also known as an early distribution or an early withdrawal.

Early Withdrawal

The withdrawal of funds from a fixed-income investment before the prescribed time. Early withdrawal may come from a certificate of deposit before its maturity. More often, however, it refers to a withdrawal from a retirement account before the appropriate age (usually 65 or the date of retirement, whichever is later). Early withdrawals are usually assessed a fee to discourage frequent or abusive use. As a result, early withdrawals usually occur when the account holder is in great financial need. An early withdrawal is also called an early distribution or a premature distribution.
References in periodicals archive ?
The IRS deemed the distribution from the IRA (in whichever year it occurred) a premature distribution subject to the additional tax under Sec.
Because retirement accounts like a 401(k) are funded with pre-tax dollars and grow tax-deferred, that means if your clients take a premature distribution, the IRS will subject them to taxes on that withdrawal.
Beginning in 2010, that premature distribution penalty is waived.
If withdrawals are taken prior to age 59-1/2, an IRS 10% premature distribution penalty tax may apply.
Some factors are subject to the taxpayer's discretion and may be used to adjust the payment to a preferred amount and still avoid the premature distribution penalty using these factors [o establish the SEPP amount in response to the IRA owner's objectives requires making choices at the beginning of the payment series.
To waive the 10 percent penalty tax for premature distribution from IRA's and qualified retirement plans, including 401(k) plans and 403(b) plans, for those individuals residing in a federally declared disaster zone.
Once that rollover took place, the only way for her to avoid the 10% penalty for a premature distribution was to qualify for one of the other exceptions listed under IRC section 72(t).
Any distribution in excess of this amount is a premature distribution subject to the early distribution tax.
The employee will be taxed on a premature distribution, plus a 10% penalty.
A premature distribution could be subject to a 10% or even 25% excise tax, also referred to as a penalty.
72(t)(6) expires: A 25% premature distribution penalty applies to any distributions made before the SIMPLE IRA participant has either completed two years of participation or reached age 591/2 (see Regs.