A premature distribution is an early withdrawal from a pension fund, for purposes other than retirement, by a taxpayer who is under 59 1/2. Early distributions are subject to an additional tax of 10 percent. The tax applies to the taxable portion of the distribution or payment.

Certain early distributions are excluded from the early distribution tax. If the distribution code in box 7 of Form 1099-R is 2, 3, or 4, the taxpayer does not have to pay the additional tax.