Avoiding Tax Penalties on Early IRA Withdrawals

– Early withdrawals from a traditional IRA before age 59½ may be subject to a 10% penalty tax on top of regular income tax.
– Exceptions to the penalty tax exist, such as using the money for medical expenses exceeding 7.5% of adjusted gross income, qualified higher education expenses, or purchasing a first home.
– There is also an exception for annuity-like annual withdrawals under IRS guidelines, known as “substantially equal periodic payments” based on life expectancy. – Early withdrawal penalties may apply when moving funds out of an account, especially if the rollover deadline is missed.
– Funds from one IRA can be rolled over to another tax-free within 60 days.
– Missing the rollover deadline may result in owing tax and early withdrawal penalty if under age 59½, although the IRS may waive the penalty in certain circumstances.
– Assistance is available to determine eligibility for exceptions to the early withdrawal penalty tax, and maintaining good records is important.
– Contact via email for any questions: taxinsights@nksfb.com.
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How to Avoid the Early Withdrawal Tax Penalty on IRA Distributions