• IRA FAQs – Distributions (Withdrawals)

    IRA FAQs – Distributions (Withdrawals) Distributions while still working

    Can I take money from my traditional IRA, or my SEP or SIMPLE IRA, while I am still working?

    You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you’re under age 59 ½. The additional tax is 25% if you take a distribution from your SIMPLE-IRA in the first 2 years you participate in the SIMPLE IRA plan. There is no exception to the 10% additional tax specifically for hardships. See chart of exceptions to the 10% additional tax.

    Do I request the distribution check directly from my employer or from the financial institution where contributions to my SEP or SIMPLE IRA are invested?

    You will need to contact the financial institution holding your IRA assets.

    If I withdraw money from my IRA before I am age 59 ½, which forms do I need to fill out?

    Regardless of your age, you will need to file a Form 1040 and show the amount of the IRA withdrawal. Since you took the withdrawal before you reached age 59 ½, unless you met one of the exceptions listed in Publication 590, you will need to pay an additional 10% tax on early distributions on your Form 1040. You may need to complete and attach a Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts , to the tax return. Certain distributions from Roth IRAs are not taxable.

    Can I deduct the 10% additional early withdrawal tax as a penalty on early withdrawal of savings?

    No, the additional 10% tax on early distributions from qualified retirement plans does not qualify as a penalty for withdrawal of savings.

    Required minimum distributions

    How much must I take out of my IRA at age 70 ½?

    Required minimum distributions (RMDs) must be taken each year beginning with the year you turn age 70 ½. The RMD for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. This rule does not apply to your Roth IRAs.

    I am over age 70 ½. Must I receive required minimum distributions from a SEP-IRA or SIMPLE-IRA if I am still working?

    Both business owners and employees over age 70 ½ must take required minimum distributions from a SEP-IRA or SIMPLE-IRA. There is no exception for non-owners who have not retired.

    Qualified charitable distributions

    What is a qualified charitable distribution?

    Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70 ½ or over that is paid directly from the IRA to a qualified charity. Under current law, the last day for making a qualified charitable distribution was December 31, 2013.

    See Charitable Donations from IRAs for more information about QCDs.

    Can a qualified charitable distribution satisfy my required minimum distribution from an IRA?

    Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2013 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2013, you were treated as having satisfied $5,000 of your required minimum distribution and had to make an additional $5,000 withdrawal for 2013.

    How are qualified charitable distributions reported on Form 1099-R?

    Charitable distributions are reported on Form 1099-R for the calendar year the distribution is made.

    How do I report a qualified charitable distribution on my income tax return?

    To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions (line 15a on the 2013 Form 20140). On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution (line 15b on the 2013 Form 1040). Enter “QCD” next to this line. See the Form 1040 instructions and Charitable Donations from IRAs for additional information.

    You must also file Form 8606, Nondeductible IRAs , if:

    • you made the qualified charitable distribution from a traditional IRA in which you had basis and received a distribution from the IRA during the same year, other than the qualified charitable distribution; or

    • the qualified charitable distribution was made from a Roth IRA.

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