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Rev. date: 12/02/2013

Additional Tax on Early Distributions from Traditional and ROTH IRAs

Tax Topic 557
To discourage the use of IRAs for purposes other than retirement, the law imposes a 10% additional tax on early distributions from traditional and Roth IRAs unless an exception applies. Generally, early distributions are those you receive from an IRA before reaching age 59½. The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.
Distributions that you roll over or transfer to another IRA or qualified retirement plan are not subject to this 10% additional tax. For more information on rollovers, refer to Tax Topic 413.
There are exceptions to this 10% additional tax for early distributions that are:
Refer to Publication 590, Individual Retirement Arrangements (IRAs), for more information on these exceptions.
Other exceptions apply to distributions from other qualified employee retirement plans. For information on these exceptions, refer to Tax Topic 558, or to Publication 575, Pension and Annuity Income. For more information on IRA distributions, refer to Publication 590.
The 10% additional tax is reported on Form 5329. However, you do not have to file Form 5329 if your Form 1099-R shows distribution code "1" in Box 7. In this instance, you need only enter the 10% additional tax directly on the appropriate line of your Form 1040. If you meet one of the exceptions to the tax, and your Form 1099-R does not have a distribution code "2", "3", or "4" in the box labeled "distribution code(s)," or if the code shown is incorrect, you must file Form 5329 to claim the exception.
Federal income tax withholding is required for distributions from IRAs unless you elect out of withholding on the distribution. However, if you elect out of withholding, you may have to make estimated tax payments. For more information on estimated tax payments, refer to Publication 505, Tax Withholding and Estimated Tax.