Page 89 - 2020 Publication 17

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Excess contributions withdrawn after due income. Early distributions are also subject to Receivership distributions. Early distribu-
date of return. In general, you must include all an additional 10% tax. See the discussion of tions (with or without your consent) from sav-
distributions (withdrawals) from your traditional Form 5329 under Reporting Additional Taxes, ings institutions placed in receivership are sub-
IRA in your gross income. However, if the fol- later, to figure and report the tax. ject to this tax unless one of the exceptions
lowing conditions are met, you can withdraw ex- listed earlier applies. This is true even if the dis-
cess contributions from your IRA and not in- Early distributions defined. Early distribu- tribution is from a receiver that is a state
tions are generally amounts distributed from
clude the amount withdrawn in your gross agency.
income. your traditional IRA account or annuity before Additional 10% tax. The additional tax on
you are age 59 1 /2.
• Total contributions (other than rollover con- early distributions is 10% of the amount of the
tributions) for 2020 to your IRA weren't Age 59 1 /2 rule. Generally, if you are under age early distribution that you must include in your
more than $6,000 ($7,000 if you are age 59 1 /2, you must pay a 10% additional tax on the gross income. This tax is in addition to any reg-
50 or older). distribution of any assets (money or other prop- ular income tax resulting from including the dis-
erty) from your traditional IRA. Distributions be-
• You didn't take a deduction for the excess fore you are age 59 1 /2 are called early distribu- tribution in income.
contribution being withdrawn. tions. Nondeductible contributions. The tax on
The withdrawal can take place at any time, The 10% additional tax applies to the part of early distributions doesn't apply to the part of a
even after the due date, including extensions, the distribution that you have to include in gross distribution that represents a return of your non-
for filing your tax return for the year. income. It is in addition to any regular income deductible contributions (basis).
Excess contribution deducted in an earlier tax on that amount. More information. For more information on
year. If you deducted an excess contribution in After age 59 1 /2 and before age 72. After early distributions, see What Acts Result in
an earlier year for which the total contributions you reach age 59 1 /2, you can receive distribu- Penalties or Additional Taxes? in chapter 1 of
weren't more than the maximum deductible tions without having to pay the 10% additional Pub. 590-B.
amount for that year (see the following table), tax. Even though you can receive distributions
you can still remove the excess from your tradi- after you reach age 59 1 /2, distributions aren't re- Excess Accumulations
tional IRA and not include it in your gross in- quired until you reach age 72. See When Must (Insufficient Distributions)
come. To do this, file Form 1040-X for that year You Withdraw IRA Assets? (Required Minimum
and don't deduct the excess contribution on the Distributions), earlier. You can't keep amounts in your traditional IRA
amended return. Generally, you can file an Exceptions. There are several exceptions indefinitely. Generally, you must begin receiving
amended return within 3 years after you filed to the age 59 1 /2 rule. Even if you receive a distri- distributions by April 1 of the year following the
your return, or 2 years from the time the tax was bution before you are age 59 1 /2, you may not year in which you reach age 72. The required
paid, whichever is later. have to pay the 10% additional tax if you are in minimum distribution for any year after the year
one of the following situations. in which you reach age 72 must be made by
Contribution • You have unreimbursed medical expenses December 31 of that later year.
limit if age that are more than 7.5% of your adjusted Tax on excess. If distributions are less than
50 or older gross income. the required minimum distribution for the year,
Contribution at the end of you may have to pay a 50% excise tax for that
Year(s) limit the year • The distributions aren't more than the cost year on the amount not distributed as required.
2019 $6,000 $7,000 of your medical insurance due to a period Request to waive the tax. If the excess accu-
of unemployment.
2013 through mulation is due to reasonable error, and you
2018 $5,500 $6,500 • You are totally and permanently disabled. have taken, or are taking, steps to remedy the
2008 through $5,000 $6,000 • You are the beneficiary of a deceased IRA insufficient distribution, you can request that the
2012 owner. tax be waived. If you believe you qualify for this
2006 or 2007 $4,000 $5,000 • You are receiving distributions in the form relief, attach a statement of explanation and
2005 $4,000 $4,500 of an annuity. complete Form 5329 as instructed under
2002 through • The distributions aren't more than your Waiver of tax for reasonable cause in the In-
2004 $3,000 $3,500 qualified higher education expenses. structions for Form 5329.
1997 through $2,000 — Exemption from tax. If you are unable to take
2001 • You use the distributions to buy, build, or required distributions because you have a tradi-
before 1997 $2,250 — rebuild a first home. tional IRA invested in a contract issued by an in-
• The distribution is due to an IRS levy of the surance company that is in state insurer delin-
Excess due to incorrect rollover informa- qualified plan. quency proceedings, the 50% excise tax
tion. If an excess contribution in your tradi- doesn't apply if the conditions and requirements
tional IRA is the result of a rollover and the ex- • The distribution is a qualified reservist dis- of Revenue Procedure 92-10 are satisfied.
tribution.
cess occurred because the information the plan More information. For more information on
was required to give you was incorrect, you can Most of these exceptions are explained under excess accumulations, see What Acts Result in
withdraw the excess contribution. The limits Early Distributions in What Acts Result in Penal- Penalties or Additional Taxes? in chapter 1 of
mentioned above are increased by the amount ties or Additional Taxes? in chapter 1 of Pub. Pub. 590-B.
of the excess that is due to the incorrect infor- 590-B.
mation. You will have to amend your return for
the year in which the excess occurred to correct Note. Distributions that are timely and prop- Reporting Additional Taxes
the reporting of the rollover amounts in that erly rolled over, as discussed earlier, aren't sub- Generally, you must use Form 5329 to report
year. Don't include in your gross income the ject to either regular income tax or the 10% ad- the tax on excess contributions, early distribu-
part of the excess contribution caused by the in- ditional tax. Certain withdrawals of excess tions, and excess accumulations.
correct information. For more information, see contributions after the due date of your return
Excess Contributions under What Acts Result in are also tax free and therefore not subject to the Filing a tax return. If you must file an individ-
Penalties or Additional Taxes? in Pub. 590-A. 10% additional tax. (See Excess contributions ual income tax return, complete Form 5329 and
withdrawn after due date of return, earlier.) This attach it to your Form 1040 or 1040-SR. Enter
Early Distributions also applies to transfers incident to divorce, as the total additional taxes due on Schedule 2
discussed earlier.
(Form 1040), line 6.
You must include early distributions of taxable Not filing a tax return. If you don't have to file
amounts from your traditional IRA in your gross a tax return but do have to pay one of the

Chapter 9 Individual Retirement Arrangements (IRAs) Page 85