Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
A Traditional IRA allows for tax deferred treatment of earnings and generally a deduction
from income for the amount contributed.
When you begin taking the money out all amounts are taxable (unless you were not allowed a tax adjustment
when you made the contributions).
The 10% penalty is imposed on amounts taken out that are taxable if the distribution
is EARLY. Early refers to you not being 59 1/2 when you take money out.
Simply this means that a Traditional IRA distribution of any amount is going to be taxable and if you are not 59 1/2 (or meet another exception) you will pay tax and an additional 10% penalty.
Exceptions to this 10% additional tax for early distributions are as follows:
Made to a beneficiary
or estate on account of the IRA owner's death
Made on account of disability
Made as part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary
Qualified first-time homebuyer distributions
Not in excess of your qualified higher education expenses
Not in excess of certain medical
insurance premiums paid while unemployed
Not in excess of your unreimbursed medical expenses
that are more than a certain percentage of your adjusted gross income
Due to an IRS
A qualified reservist distribution
The 10% additional tax applies to the part of the distribution that you have to include in gross income
. It is in addition to any regular income tax on that amount.
I sincerely ***** ***** have explained this complicated subject but please let me know if you need clarification.