Having a retirement fund set up to help offset the costs associated with life after employment, is a smart financial decision. However, situations may arise that require you to withdraw some cash from your savings plan earlier than you expected. Doing so can activate an additional tax, and cause you to have to report withdrawals to the IRS. The following facts relate to early withdrawals from retirement funds, and can help you file when it comes to tax time.<\/p>\n
Early withdrawal is defined as any money removed from the retirement savings before the age of 59 \u00bd. Any withdrawals during the tax year required reporting the specific amount to the IRS. You\u2019ll likely have to pay income tax on the money you received, and you can be subject to an additional 10% tax on the withdrawal.<\/span><\/p>\n This additional tax doesn\u2019t apply to withdrawals that are non-taxable, though. If you withdraw the amount it costs you to participate in the retirement plan, including all contributions previously taxed before being added to the plan, you won\u2019t have to pay tax.<\/span><\/p>\n Another non-taxable withdrawal is a rollover. Rollovers occur when you relocate your assets from one plan to another. Typically, you\u2019re given a sixty day period to relocate your assets to the second plan once they\u2019ve been withdrawn from the original fund. <\/span><\/p>\n The rules for retirement plans and IRAs are different, but there are exceptions that can spare you from paying the additional 10% withdrawal tax. Any early withdrawals require the filing of Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, in addition to your regular return. <\/span><\/p>\n Filing your taxes when you have a retirement plan, withdrawal or not, can be tricky, so it\u2019s best to make sure you have reviewed all requirements before filing. You can prepare and electronically file your return quickly and safely using a tax software. Tax software determines the right forms to fill out, handles the math, and get you all the benefits and credits you qualify for. <\/span><\/p>\n Over 80% of taxpayers file electronically, and utilize easy electronic payment options, which can make tax time a breeze.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Having a retirement fund set up to help offset the costs associated with life after employment, is a smart financial decision. However, situations may arise that require you to withdraw some cash from your savings plan earlier than you expected. Doing so can activate an additional tax, and cause you to have to report withdrawals […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[121],"tags":[133,132,38,131],"class_list":["post-68","post","type-post","status-publish","format-standard","hentry","category-income","tag-form-5329","tag-ira","tag-retirement","tag-rollovers"],"yoast_head":"\n