How to Withdraw Funds From a Tax-Deferred IRA
Tax-deferred individual retirement accounts (IRAs) include traditional IRAs, simplified employee pension (SEP) IRAs and Simple IRAs. Tax-deferred IRAs grant tax deductions for contributions but require you to pay income taxes when you take distributions from the account. Non-qualified distributions, those taken before age 59 1/2, also require you to pay an early withdrawal penalty. Getting your money out of a tax-deferred IRAs is easy because you can remove the money at any time. However, you need to report the withdrawals properly on your income taxes.
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Things You'll Need
- Form 1099-R
- Form 5329 (non-qualified distributions only)
- Form 1040 or Form 1040A
Instructions
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Request a withdrawal from your bank or other financial institution that has your tax-deferred IRA. Your financial institution cannot prevent you from taking a distribution at any time.
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File Form 5329 with your income taxes to determine your penalty if you take your distribution before age 59 1/2. If you have an early withdrawal exemption reason -- such as medical expenses above 7.5 percent of your adjusted gross income, post-secondary expenses or a permanent disability -- document the exception on the form and the Internal Revenue Service waives the penalty.
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Copy the amount of your penalty, if any, onto line 58 of your Form 1040 tax return. This amount adds to your tax liability for the year.
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Report the amount of your withdrawal as a taxable IRA distribution on your income tax return. You must use either Form 1040 or Form 1040A to file your taxes if you have a tax-deferred IRA distribution. This amount counts as taxable income.
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