Additional Tax
	Exceptions

For this purpose, a qualified retirement plan includes:

	A qualified employee retirement plan,
	A qualified annuity plan,
	A tax-shelter annuity plan for employees of public schools or tax-exempt organizations, or
	IRA

The additional tax on premature distribution is 10% of the amount of the premature distribution that you must include in your gross income. This tax is in addition to any regular income tax resulting from including the distribution in income.

NOTE: The tax on premature distributions does not apply to the part of a distribution that represents a return of your nondeductible contributions (basis). This applies to IRAs only.

Additional Tax Example
Connie and Bill Brown have a combined income of $30,000. Bill has $4,000 built up in his pension account. They decide to take $2,000 out as a premature distribution to take a vacation.

The Brown's file a married filing jointly status return. With their income, the Brown's are in the 15% tax bracket. 

Based on the 15% tax bracket and 10% penalty, the $2,000 distribution becomes $1,500 in the Brown's pocket and $500 is tax.

Exceptions

 

	Made to you on or after the date you reach age 59 1/2,
	Made to a beneficiary or to the estate of the plan participant or annuity holder on or after his or her death,
	Made because you are totally and permanently disabled,
	Made as part of a series of substantially equal period (or at least annual) payments over your life expectancy or the joint life expectancy of you and your beneficiary (if from a qualified employee plan, payments must begin after separation from service).
	Made to pay for qualified higher education expenses for yourself, your spouse, your children, or grandchildren to the extent that the distribution does not exceed the qualified higher education expenses for the taxable year,
	Made to pay for a first-time home for yourself, your spouse, your children, grandchildren, or your ancestors to the extent that the distribution is used by you within 120 days from the date of the distribution,
	Not more than your deductible medical expense (the medical expense that exceeds 7.5% of your adjusted gross income) whether or not you itemize deductions for the tax year.

Exceptions that apply to early distributions from a pension only:

	Made to you after you separated from service if the separation occurred during or after the calendar year in which you reached age 55.
	Paid to alternate payees under qualified domestic relation orders.
	Made to you to correct excess deferrals, excess contributions or excess aggregate contributions.