How to Prove Hardship for an Early IRA Withdrawal
Dipping into an individual retirement account, or IRA, before age 59½ could result in a 10 percent tax penalty by the Internal Revenue Service. The IRS imposes the penalty to encourage people not to dip into their IRA before they reach retirement age. However, several exceptions are possible, allowing early withdrawals without the penalty. To qualify, a person must have a financial hardship that qualifies for special consideration.
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Instructions
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Gather unreimbursed medical bills to prove a hardship for an early IRA withdrawal. According to Bankrate.com, people can withdraw money from their IRA without penalty to pay for deductible medical expenses, in some instances. However, the unreimbursed medical bills must exceed 7.5 percent of your adjusted gross income, according to Bankrate.com. To escape the penalty, you must make the hardship withdrawal in the same year you incur the medical expenses.
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Prove a hardship because of health insurance premiums, if unreimbursed medical bills are not an option. Hardship withdrawals are available to people who are unemployed for at least 12 weeks and take money from their IRA to pay health insurance premiums. Prove you qualify for the hardship by gathering records showing at least 12 weeks unemployment, along with canceled checks showing payment for the insurance premiums. Prove unemployment with a copy of a layoff notice or confirmation of eligibility for unemployment benefits.
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Show evidence of disability as another alternative. The IRS allows people who are totally and permanently disabled to dip into their IRA without penalty. Prove complete and permanent disability through correspondence about disability payments from Social Security. Or show confirmation of disability from a non-government provider of disability insurance, such as an insurance company. Provide correspondence from the company and evidence of payments.
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Tips & Warnings
It doesn’t qualify as a hardship, but you can also take money from your IRA without penalty to buy a house -- if you have not purchased a home in two years, according to Bankrate.com. Penalty-free withdrawals are also available from IRA accounts for paying postsecondary education expenses for yourself and other immediate family members such as children and grandchildren.
