Publication 554 - Older Americans' Tax Guide - 2002 Page 9
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29subject to a 20% tax rate. The part from participation after
Additional exceptions for qualified retirement plans.
1973 (and any part from participation before 1974 that you
The tax does not apply to distributions that are:
do not report as capital gain) is ordinary income. You may
•
From a qualified retirement plan after your separa-
be able to use the 10-year tax option to figure tax on the
tion from service in or after the year you reached
ordinary income part.
age 55,
Form 1099 – R. If you receive a total distribution from a
•
From a qualified retirement plan to an alternate
plan, you should receive a Form 1099 – R. If the distribution
payee under a qualified domestic relations order,
qualifies as a lump-sum distribution, box 3 shows the
•
capital gain. The amount in box 2a minus the amount in
From a qualified retirement plan to the extent you
have deductible medical expenses (medical ex-
box 3 is the ordinary income.
penses that exceed 7.5% of your adjusted gross
More information. For more detailed information on
income), whether or not you itemize your deductions
lump-sum distributions, get Publication 575 or Form 4972,
for the year,
Tax on Lump-Sum Distributions.
•
From an employer plan under a written election that
provides a specific schedule for distribution of your
Tax on Early Distributions
entire interest if, as of March 1, 1986, you had sepa-
rated from service and had begun receiving pay-
Most distributions you receive from your qualified retire-
ments under the election,
ment plan or deferred annuity contract before you reach
•
age 59
1
/
are subject to an additional tax of 10%. The tax
From an employee stock ownership plan for divi-
2
applies to the taxable part of the distribution.
dends on employer securities held by the plan, or
For this purpose, a qualified retirement plan is:
•
From a qualified retirement plan due to an IRS levy
of the plan.
1) A qualified employee plan,
2) A qualified employee annuity plan,
Additional exceptions for nonqualified annuity con-
tracts. The tax does not apply to distributions that are:
3) A tax-sheltered annuity plan (403(b) plan), or
•
From a deferred annuity contract to the extent allo-
4) An IRA.
cable to investment in the contract before August 14,
1982,
5% rate on certain early distributions from deferred
•
annuity contracts. If an early withdrawal from a deferred
From a deferred annuity contract under a qualified
annuity is otherwise subject to the 10% additional tax, a
personal injury settlement,
5% rate may apply instead. A 5% rate applies to distribu-
•
From a deferred annuity contract purchased by your
tions under a written election providing a specific schedule
employer upon termination of a qualified employee
for the distribution of your interest in the contract if, as of
plan or qualified employee annuity plan and held by
March 1, 1986, you had begun receiving payments under
your employer until your separation from service, or
the election. On line 4 of Form 5329, multiply by 5%
•
instead of 10%. Attach an explanation to your return.
From an immediate annuity contract (a single pre-
mium contract providing substantially equal annuity
Exceptions to tax. The early distribution tax does not
payments that start within one year from the date of
apply to any distribution that meets one of the following
purchase and are paid at least annually).
exceptions.
General exceptions. The tax does not apply to distri-
Reporting tax or exception. If distribution code 1 (early
butions that are:
distribution, no known exception) is shown in box 7 of Form
•
Made as part of a series of substantially equal peri-
1099 –R, multiply the taxable part of the early distribution
odic payments (made at least annually) for your life
by 10% and enter the result on line 58 of Form 1040. Write
(or life expectancy) or the joint lives (or joint life
“No” on the dotted line. You do not have to file Form 5329.
expectancies) of you and your designated benefi-
You do not have to file Form 5329 if you qualify for an
ciary (if from a qualified retirement plan, the pay-
exception to the 10% tax and distribution code 2, 3, or 4 is
ments must begin after separation from service),
shown in box 7 of Form 1099 –R. However, you must file
•
Form 5329 if the code is not shown or the code shown is
Made because you are totally and permanently dis-
incorrect (for example, code 1 is shown although you meet
abled, or
an exception).
•
Made on or after the death of the plan participant or
contract holder.
Chapter 2 Taxable and Nontaxable Income
Page 9
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial