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 ?
First, if you withdraw funds from your 401(k) before you are 591/2, you will owe a 10% premature distribution penalty on the withdrawal.
To the extent the participant fails to roll over all or part of the distribution into a new IRA, the amount of the shortfall would be treated as a distribution subject to income tax and potentially a 10% premature distribution penalty if the participant is under the age of 59A1/2.
But there is a hidden factor in the "premature distribution" of gratuity which is to the advantage of the employer.
The substantial limitations placed upon many of the exceptions to the premature distribution penalty might be too restrictive for the average taxpayer and can limit planning opportunities (i.e., many of the provisions specify the exact use available for the distributed funds, such as medical care, medical insurance premiums, higher education expenses, and purchase of a first home).
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.
While Spain could boast, along with six other EU countries (Germany, Denmark, Finland, Luxembourg, Sweden and the Netherlands), of having already carried out the shift to digital well before the 1 January 2012 date set by the Commission, the situation has still not been resolved due to the premature distribution of some of its high frequencies between public TV stations.
Beginning in 2010, that premature distribution penalty is waived.
Since the distributions are made to the beneficiary of a decedent's IRA, no premature distribution penalties will 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.
Distributions from SIMPLE IRAs are treated in the same manner as those from traditional IRAs, except that the premature distribution penalty is 25% (instead of 10%) for the first two years of participation.
Except due to disability, if you decide you want a lump-sum withdrawal paid directly to you, the plan trustee must withhold 20% for federal income tax Also, if you do not attain age 55 prior to the end of the year in which you separate from service, the trustee must also withhold an additional 10% premature distribution penalty.