What Are the Consequences of Premature Distributions from a Qualified

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The Answer is If an individual makes a withdrawal from an IRA account prior to reaching the age of 59 and a half years, an additional tax of 10 percent is imposed on the taxable portion of the withdrawal. Of course, this additional tax is waved if the distribution is: (a) triggered by either death or disability; (b) used to purchase a single or joint lifetime annuity; (c) rolled over within 60 days into another IRA; (d) due to hardship; or (e) made to someone besides the participant under a qualified domestic relations order.
The 10 percent penalty tax on early distribution is imposed on qualified defined benefit and defined contribution plans, tax-sheltered annuities, SEPs, and custodial accounts. However, the exceptions to this additional tax are: (a) death; (b) disability; (c) joint or single lifetime annuity distributions; (d) distributions to employees who have attained the age of 55, separated from service, and who received distribution as part of an early retirement arrangement; (e) distributions made to pay deductible medical expenses; (f) distributions of dividends from profit sharing or stock bonus plans; (g) distributions from ESOPs that have been invested in employer securities for five years; and (h) payments made to a former spouse, child, or other dependent of the participant under a qualified domestic relations order.

What Are the Consequences of Premature Distributions from a Qualified

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