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I have read where are no early distribution penalties for…

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I have read where are...
I have read where are no early distribution penalties for early withdrawals on inherited IRAs. What if the beneficiary in under 59 1/2?
Submitted: 5 months ago.Category: Tax
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11/15/2017
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Tax
Satisfied Customers: 2,183
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Hello!

When the taxpayer receives distributions directly from the inherited IRA, the distributions are taxed, but the 10% penalty tax on premature withdrawals does not apply, even if the beneficiary is under the age of 59 1/2 .

https://www.irs.gov/taxtopics/tc557

Here is a link to IRS Tax number 557- Additional Tax on Early distributions.

Exceptions to the additional 10% tax apply for early distributions that are:

  • 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
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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago

The complete topic is covered under Publication 590

https://www.irs.gov/publications/p590b

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago

If the IRA was inherited from a spouse and you rolled the funds over into an IRA owned by yourself, then those distributions may be subject to the early distributions 10% penalty.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago

If you inherited the IRA from someone other than your spouse, then you would not be subject to the early withdraw penalty.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago
I would be happy to answer any follow up questions you may have. At the conclusion of our conversation please take a moment to accept the answer by rating the answer with three stars or more. A positive rating of five stars is always appreciated. Thank you!
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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 5 months ago
I would be happy to answer any follow up questions you may have. At the conclusion of our conversation please take a moment to accept the answer by rating the answer with three stars or more. A positive rating of five stars is always appreciated. Thank you!
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