If I experienced a job termination, do I need to pay the 10% on my employer retirement plan withdrawal?
It depends on your age. The 10% early-distribution penalty doesn’t apply to distributions made to an employee:
- After separation from service
- After reaching age 55
- After reaching age 50, if you’re a qualified public safety employee. A public safety employee is a state or local employee who provides one of these:
- Police protection
- Firefighting services
- Emergency medical services
You qualify for this exception if you meet both of these conditions:
- The distribution is made after you’ve separated from service with the employer maintaining the plan.
- The separation from service occurs during or after the calendar year in which you reach the age requirement.
Other common exceptions include payments:
- Received after reaching age 59 1/2
- Allocable to investment in the contract before Aug. 14, 1982
- Paid after your disability or death
- Received as part of a series of substantially equal periodic payments over your life or life expectancy
To avoid the penalty, you should roll the distribution from the employer plan into an IRA. You must do this within 60 days of the distribution.
Also, the additional 10% tax doesn’t apply to distributions you take if both of these are true:
- You’re a qualified reservist.
- You’re called to active duty for at least 180 days.
The IRS intends to terminate your installment agreement. Learn more about IRs letter 2975 and how to address it with help from the tax experts at H&R Block.
Get the facts from H&R Block about the IRS monthly payment plan called a conditional installment agreement, which considers your full financial picture.
When does tax reform take effect? The new tax law passed in 2017, with most provisions going into effect in tax year 2018. Learn more with the experts at H&R Block.
For many people, their status with the IRS is a mystery. Learn four ways to request your tax information from the IRS to make sure you're in good standing.