IRA FAQs - Distributions (Withdrawals)
Distributions while still working
Can I take money from my SEP, SARSEP or SIMPLE IRA plan 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 1/2. 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.
Do I request the distribution check directly from my employer or from the financial institution where contributions to my SEP or SIMPLE IRA plan 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 1/2, 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 1/2, 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 1/2?
Required minimum distributions (RMDs) must be taken each year beginning with the year you turn age 70 1/2. 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. You can determine your distribution period or life expectancy by using the Tables in Appendix C of Publication 590 Individual Retirement Arrangements (IRAs).
Table I - for beneficiaries.
Table II - for owners whose spouse is 10 years younger and the IRA's sole beneficiary
Table III - for all other owners (most IRA owners will use this table)
See the discussion of required minimum distributions and worksheets to calculate the required amount.
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 1/2 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 70½ or over that is paid directly from the IRA to a qualified charity. As an IRA owner, you:
- can exclude from gross income up to $100,000 of a qualified charitable distribution made for a year, and
- can’t claim a deduction for the amount of the donation excluded from gross income.
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 is $10,000, and you make a $5,000 qualified charitable distribution for 2013, you have only satisfied $5,000 of your RMD and must still take a $5,000 RMD 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. IRA trustees must report distributions made in:
- 2013, including any 2012 qualified charitable distributions made in January 2013, on a 2013 Form 1099-R;
- 2012 on a 2012 Form 1099-R;
- 2011, including any 2010 qualified charitable distributions made in January 2011, on a 2011 Form 1099-R; and
- 2010 on a 2010 Form 1099-R.
How do I report a qualified charitable distribution on my income tax return?
To report a qualified charitable distribution on your tax return for:
2012 – report on your 2012 Form 1040
- include the full amount of the 2012 qualified charitable distribution (even if in excess of $100,000) on line 15a of your 2012 Form 1040 (line 11a of Form 1040A and line 16a of Form 1040NR);
- do not include any amount on line 15b of your 2012 Form 1040 (line 11b of Form 1040A and line 16b of Form 1040NR) and write “QCD” next to this line; and
- report your 2012 qualified charitable distribution made in January 2013 on your 2013 Form 1040 (the 2013 Form 1040 instructions will contain the reporting requirements).
- See Charitable Donations from IRAs for 2012 and 2013 for additional instructions.
2011 and 2010 – See Charitable Donations from IRAs for 2010 and 2011
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.