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IRS.gov Website
Publication 590
taxmap/pubs/p590-012.htm#en_us_publink1000230854

What Acts Result in Penalties or Additional Taxes?(p44)

rule
The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. There are additions to the regular tax for using your IRA funds in prohibited transactions. There are also additional taxes for the following activities.
There are penalties for overstating the amount of nondeductible contributions and for failure to file Form 8606, if required.
This chapter discusses those acts that you should avoid and the additional taxes and other costs, including loss of IRA status, that apply if you do not avoid those acts.
taxmap/pubs/p590-012.htm#en_us_publink1000230855

Prohibited Transactions(p44)

rule
Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.
Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
The following are examples of prohibited transactions with a traditional IRA.
taxmap/pubs/p590-012.htm#en_us_publink1000230856

Fiduciary.(p44)

rule
For these purposes, a fiduciary includes anyone who does any of the following.
taxmap/pubs/p590-012.htm#en_us_publink1000230857

Effect on an IRA account.(p44)

rule
Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year.
taxmap/pubs/p590-012.htm#en_us_publink1000230858

Effect on you or your beneficiary.(p44)

rule
If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. For information on figuring your gain and reporting it in income, see Are Distributions Taxable, earlier. The distribution may be subject to additional taxes or penalties.
taxmap/pubs/p590-012.htm#en_us_publink1000230860
Borrowing on an annuity contract.(p44)
If you borrow money against your traditional IRA annuity contract, you must include in your gross income the fair market value of the annuity contract as of the first day of your tax year. You may have to pay the 10% additional tax on early distributions, discussed later.
taxmap/pubs/p590-012.htm#en_us_publink1000230861
Pledging an account as security.(p44)
If you use a part of your traditional IRA account as security for a loan, that part is treated as a distribution and is included in your gross income. You may have to pay the 10% additional tax on early distributions, discussed later.
taxmap/pubs/p590-012.htm#en_us_publink1000230862

Trust account set up by an employer or an employee association.(p44)

rule
Your account or annuity does not lose its IRA treatment if your employer or the employee association with whom you have your traditional IRA engages in a prohibited transaction.
taxmap/pubs/p590-012.htm#en_us_publink1000230863
Owner participation.(p44)
If you participate in the prohibited transaction with your employer or the association, your account is no longer treated as an IRA.
taxmap/pubs/p590-012.htm#en_us_publink1000230864

Taxes on prohibited transactions.(p44)

rule
If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected.
taxmap/pubs/p590-012.htm#en_us_publink1000230865
Loss of IRA status.(p44)
If the traditional IRA ceases to be an IRA because of a prohibited transaction by you or your beneficiary, you or your beneficiary are not liable for these excise taxes. However, you or your beneficiary may have to pay other taxes as discussed under Effect on you or your beneficiary, earlier.
taxmap/pubs/p590-012.htm#en_us_publink1000230867

Exempt Transactions(p48)

rule
The following two types of transactions are not prohibited transactions if they meet the requirements that follow.
taxmap/pubs/p590-012.htm#en_us_publink1000230868

Payments of cash, property, or other consideration.(p48)

rule
Even if a sponsor makes payments to you or your family, there is no prohibited transaction if all three of the following requirements are met.
  1. The payments are for establishing a traditional IRA or for making additional contributions to it.
  2. The IRA is established solely to benefit you, your spouse, and your or your spouse's beneficiaries.
  3. During the year, the total fair market value of the payments you receive is not more than:
    1. $10 for IRA deposits of less than $5,000, or
    2. $20 for IRA deposits of $5,000 or more.
If the consideration is group term life insurance, requirements (1) and (3) do not apply if no more than $5,000 of the face value of the insurance is based on a dollar-for-dollar basis on the assets in your IRA.
taxmap/pubs/p590-012.htm#en_us_publink1000230869

Services received at reduced or no cost.(p48)

rule
Even if a sponsor provides services at reduced or no cost, there is no prohibited transaction if all of the following requirements are met.
taxmap/pubs/p590-012.htm#en_us_publink1000230870

Investment in Collectibles(p48)

rule
If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.
Any amounts that were considered to be distributed when the investment in the collectible was made, and which were included in your income at that time, are not included in your income when the collectible is actually distributed from your IRA.
taxmap/pubs/p590-012.htm#en_us_publink1000230871

Collectibles.(p48)

rule
These include:
taxmap/pubs/p590-012.htm#en_us_publink1000230872
Exception.(p48)
Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.
taxmap/pubs/p590-012.htm#en_us_publink1000230873

Excess Contributions(p48)

rule
Generally, an excess contribution is the amount contributed to your traditional IRAs for the year that is more than the smaller of:
The taxable compensation limit applies whether your contributions are deductible or nondeductible.
Contributions for the year you reach age 701/2 and any later year are also excess contributions.
An excess contribution could be the result of your contribution, your spouse's contribution, your employer's contribution, or an improper rollover contribution. If your employer makes contributions on your behalf to a SEP IRA, see Publication 560.
taxmap/pubs/p590-012.htm#en_us_publink1000230875

Tax on Excess Contributions(p48)

rule
In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year.
The additional tax is figured on Form 5329. For information on filing Form 5329, see Reporting Additional Taxes, later.
taxmap/pubs/p590-012.htm#en_us_publink1000230877

Example.(p49)

For 2010, Paul Jones is 45 years old and single, his compensation is $31,000, and he contributed $5,500 to his traditional IRA. Paul has made an excess contribution to his IRA of $500 ($5,500 minus the $5,000 limit). The contribution earned $5 interest in 2010 and $6 interest in 2011 before the due date of the return, including extensions. He does not withdraw the $500 or the interest it earned by the due date of his return, including extensions.
Paul figures his additional tax for 2010 by multiplying the excess contribution ($500) shown on Form 5329, line 16, by .06, giving him an additional tax liability of $30. He enters the tax on Form 5329, line 17, and on Form 1040, line 58. See Paul's filled-in Form 5329.
taxmap/pubs/p590-012.htm#en_us_publink1000230878
taxmap/pubs/p590-012.htm#en_us_publink1000230879

Excess Contributions Withdrawn 
by Due Date of Return(p49)

rule
You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw any interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.
taxmap/pubs/p590-012.htm#en_us_publink1000230880

How to treat withdrawn contributions.(p49)

rule
Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both of the following conditions are met. You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. If there was a loss, the net income you must withdraw may be a negative amount.
In most cases, the net income you must transfer will be determined by your IRA trustee or custodian. If you need to determine the applicable net income you need to withdraw, you can use the same method that was used in Worksheet 1-3, earlier.
If you timely filed your 2010 tax return without withdrawing a contribution that you made in 2010, you can still have the contribution returned to you within 6 months of the due date of your 2010 tax return, excluding extensions. If you do, file an amended return with "Filed pursuant to section 301.9100-2" written at the top. Report any related earnings on the amended return and include an explanation of the withdrawal. Make any other necessary changes on the amended return (for example, if you reported the contributions as excess contributions on your original return, include an amended Form 5329 reflecting that the withdrawn contributions are no longer treated as having been contributed).
taxmap/pubs/p590-012.htm#en_us_publink1000230881

How to treat withdrawn interest or other income.(p49)

rule
You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made. Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discussed later.
taxmap/pubs/p590-012.htm#en_us_publink1000230882

Form 1099-R.(p49)

rule
You will receive Form 1099-R indicating the amount of the withdrawal. If the excess contribution was made in a previous tax year, the form will indicate the year in which the earnings are taxable.
taxmap/pubs/p590-012.htm#en_us_publink1000230883

Example.(p49)

Maria, age 35, made an excess contribution in 2010 of $1,000, which she withdrew by April 18, 2011, the due date of her return. At the same time, she also withdrew the $50 income that was earned on the $1,000. She must include the $50 in her gross income for 2010 (the year in which the excess contribution was made). She must also pay an additional tax of $5 (the 10% additional tax on early distributions because she is not yet 591/2 years old), but she does not have to report the excess contribution as income or pay the 6% excise tax. Maria receives a Form 1099-R showing that the earnings are taxable for 2010.
taxmap/pubs/p590-012.htm#en_us_publink1000230884

Excess Contributions Withdrawn 
After Due Date of Return(p49)

rule
In general, you must include all distributions (withdrawals) from your traditional IRA in your gross income. However, if the following conditions are met, you can withdraw excess contributions from your IRA and not include the amount withdrawn in your gross income. The withdrawal can take place at any time, even after the due date, including extensions, for filing your tax return for the year.
taxmap/pubs/p590-012.htm#en_us_publink1000230885

Excess contribution deducted in an earlier year.(p49)

rule
If you deducted an excess contribution in an earlier year for which the total contributions were not more than the maximum deductible amount for that year ($2,000 for 2001 and earlier years, $3,000 for 2002 through 2004 ($3,500 if you were age 50 or older), $4,000 for 2005 ($4,500 if you were age 50 or older), $4,000 for 2006 or 2007 ($5,000 if you were age 50 or older), $5,000 for 2008 or 2009 ($6,000 if you were age 50 or older)), you can still remove the excess from your traditional IRA and not include it in your gross income. To do this, file Form 1040X, Amended U.S. Individual Income Tax Return, for that year and do not deduct the excess contribution on the amended return. Generally, you can file an amended return within 3 years after you filed your return, or 2 years from the time the tax was paid, whichever is later.
taxmap/pubs/p590-012.htm#en_us_publink1000230886

Excess due to incorrect rollover information.(p49)

rule
If an excess contribution in your traditional IRA is the result of a rollover and the excess occurred because the information the plan was required to give you was incorrect, you can withdraw the excess contribution. The limits mentioned above are increased by the amount of the excess that is due to the incorrect information. You will have to amend your return for the year in which the excess occurred to correct the reporting of the rollover amounts in that year. Do not include in your gross income the part of the excess contribution caused by the incorrect information.
taxmap/pubs/p590-012.htm#en_us_publink1000230887

Deducting an Excess Contribution 
in a Later Year(p51)

rule
You cannot apply an excess contribution to an earlier year even if you contributed less than the maximum amount allowable for the earlier year. However, you may be able to apply it to a later year if the contributions for that later year are less than the maximum allowed for that year.
You can deduct excess contributions for previous years that are still in your traditional IRA. The amount you can deduct this year is the lesser of the following two amounts.
This method lets you avoid making a withdrawal. It does not, however, let you avoid the 6% tax on any excess contributions remaining at the end of a tax year.
To figure the amount of excess contributions for previous years that you can deduct this year, see Worksheet 1-6.
 
taxmap/pubs/p590-012.htm#en_us_publink1000230888

Worksheet 1-6. Excess Contributions Deductible This Year

Use this worksheet to figure the amount of excess contributions from prior years you can deduct this year.

1.Maximum IRA deduction for the current year1.
2.IRA contributions for the current year2.
3.Subtract line 2 from line 1. If zero (0) or less, enter zero3.
4.Excess contributions in IRA at beginning of year4.
5.Enter the lesser of line 3 or line 4. This is the amount of excess contributions for previous years that you can deduct this year 5.
taxmap/pubs/p590-012.htm#en_us_publink1000230890

Example.(p51)

Teri was entitled to contribute to her traditional IRA and deduct $1,000 in 2009 and $1,500 in 2010 (the amounts of her taxable compensation for these years). For 2009, she actually contributed $1,400 but could deduct only $1,000. In 2009, $400 is an excess contribution subject to the 6% tax. However, she would not have to pay the 6% tax if she withdrew the excess (including any earnings) before the due date of her 2009 return. Because Teri did not withdraw the excess, she owes excise tax of $24 for 2009. To avoid the excise tax for 2010, she can correct the $400 excess amount from 2009 in 2010 if her actual contributions are only $1,100 for 2010 (the allowable deductible contribution of $1,500 minus the $400 excess from 2009 she wants to treat as a deductible contribution in 2010). Teri can deduct $1,500 in 2010 (the $1,100 actually contributed plus the $400 excess contribution from 2009). This is shown on the following worksheet.
 
taxmap/pubs/p590-012.htm#en_us_publink1000230891

Worksheet 1-6. Example—Illustrated

Use this worksheet to figure the amount of excess contributions from prior years you can deduct this year.

1.Maximum IRA deduction for the current year1.1,500
2.IRA contributions for the current year2.1,100
3.Subtract line 2 from line 1. If zero (0) or less, enter zero3.400
4.Excess contributions in IRA at beginning of year4.400
5.Enter the lesser of line 3 or line 4. This is the amount of excess contributions for previous years that you can deduct this year 5.400
taxmap/pubs/p590-012.htm#en_us_publink1000230893

Closed tax year.(p51)

rule
A special rule applies if you incorrectly deducted part of the excess contribution in a closed tax year (one for which the period to assess a tax deficiency has expired). The amount allowable as a traditional IRA deduction for a later correction year (the year you contribute less than the allowable amount) must be reduced by the amount of the excess contribution deducted in the closed year.
To figure the amount of excess contributions for previous years that you can deduct this year if you incorrectly deducted part of the excess contribution in a closed tax year, see Worksheet 1-7. taxmap/pubs/p590-012.htm#en_us_publink1000230894

Worksheet 1-7. Excess Contributions Deductible This Year if Any Were Deducted in a Closed Tax Year

Use this worksheet to figure the amount of excess contributions for prior years that you can deduct this year if you incorrectly deducted excess contributions in a closed tax year.

1.Maximum IRA deduction for the current year1.
2.IRA contributions for the current year2.
3.If line 2 is less than line 1, enter any excess contributions that were deducted in a closed tax year. Otherwise, enter zero (0) 3.
4.Subtract line 3 from line 14.
5.Subtract line 2 from line 4. If zero (0) or less, enter zero5.
6.Excess contributions in IRA at beginning of year6.
7.Enter the lesser of line 5 or line 6. This is the amount of excess contributions for previous years that you can deduct this year 7.
taxmap/pubs/p590-012.htm#en_us_publink1000230896

Early Distributions(p52)

rule
You must include early distributions of taxable amounts from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax, as discussed later.
taxmap/pubs/p590-012.htm#en_us_publink1000230898

Early distributions defined.(p52)

rule
Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 591/2, or amounts you receive when you cash in retirement bonds before you are age 591/2.
taxmap/pubs/p590-012.htm#en_us_publink1000230899

Age 591/2 Rule(p52)

rule
Generally, if you are under age 591/2, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA. Distributions before you are age 591/2 are called early distributions.
The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.
A number of exceptions to this rule are discussed later under Exceptions. Also see Contributions Returned Before Due Date of Return, earlier.
EIC
You may have to pay a 25%, rather than a 10%, additional tax if you receive distributions from a SIMPLE IRA before you are age 591/2. See Additional Tax on Early Distributions under When Can You Withdraw or Use Assets, in chapter 3.
taxmap/pubs/p590-012.htm#en_us_publink1000230903

After age 591/2 and before age 701/2.(p52)

rule
After you reach age 591/2, you can receive distributions without having to pay the 10% additional tax. Even though you can receive distributions after you reach age 591/2, distributions are not required until you reach age 701/2. See When Must You Withdraw Assets? (Required Minimum Distributions), earlier.
taxmap/pubs/p590-012.htm#en_us_publink1000230905

Exceptions(p52)

rule
There are several exceptions to the age 591/2 rule. Even if you receive a distribution before you are age 591/2, you may not have to pay the 10% additional tax if you are in one of the following situations. Most of these exceptions are explained below.
Note.Distributions that are timely and properly rolled over, as discussed earlier, are not subject to either regular income tax or the 10% additional tax. Certain withdrawals of excess contributions after the due date of your return are also tax free and therefore not subject to the 10% additional tax. (See Excess Contributions Withdrawn After Due Date of Return, earlier.) This also applies to transfers incident to divorce, as discussed earlier under Can You Move Retirement Plan Assets.
taxmap/pubs/p590-012.htm#en_us_publink1000230909
Receivership distributions.(p52)
Early distributions (with or without your consent) from savings institutions placed in receivership are subject to this tax unless one of the above exceptions applies. This is true even if the distribution is from a receiver that is a state agency.
taxmap/pubs/p590-012.htm#en_us_publink1000230910

Unreimbursed medical expenses.(p52)

rule
Even if you are under age 591/2, you do not have to pay the 10% additional tax on distributions that are not more than: You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A, Form 1040. You do not have to itemize your deductions to take advantage of this exception to the 10% additional tax.
taxmap/pubs/p590-012.htm#en_us_publink1000230911
Adjusted gross income.(p53)
This is the amount on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37.
taxmap/pubs/p590-012.htm#en_us_publink1000230912

Medical insurance.(p53)

rule
Even if you are under age 591/2, you may not have to pay the 10% additional tax on distributions during the year that are not more than the amount you paid during the year for medical insurance for yourself, your spouse, and your dependents. You will not have to pay the tax on these amounts if all of the following conditions apply.
taxmap/pubs/p590-012.htm#en_us_publink1000230913

Disabled.(p53)

rule
If you become disabled before you reach age 591/2, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.
You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.
taxmap/pubs/p590-012.htm#en_us_publink1000230914

Beneficiary.(p53)

rule
If you die before reaching age 591/2, the assets in your traditional IRA can be distributed to your beneficiary or to your estate without either having to pay the 10% additional tax.
However, if you inherit a traditional IRA from your deceased spouse and elect to treat it as your own (as discussed under What if You Inherit an IRA, earlier), any distribution you later receive before you reach age 591/2 may be subject to the 10% additional tax.
taxmap/pubs/p590-012.htm#en_us_publink1000230916

Annuity.(p53)

rule
You can receive distributions from your traditional IRA that are part of a series of substantially equal payments over your life (or your life expectancy), or over the lives (or the joint life expectancies) of you and your beneficiary, without having to pay the 10% additional tax, even if you receive such distributions before you are age 591/2. You must use an IRS-approved distribution method and you must take at least one distribution annually for this exception to apply. The "required minimum distribution method," when used for this purpose, results in the exact amount required to be distributed, not the minimum amount.
There are two other IRS-approved distribution methods that you can use. They are generally referred to as the "fixed amortization method" and the "fixed annuitization method." These two methods are not discussed in this publication because they are more complex and generally require professional assistance. For information on these methods, see Revenue Ruling 2002-62, which is on page 710 of Internal Revenue Bulletin 2002-42 at www.irs.gov/pub/irs-irbs/irb02-42.pdf.
taxmap/pubs/p590-012.htm#en_us_publink1000230917
Recapture tax for changes in distribution method under equal payment exception.(p53)
You may have to pay an early distribution recapture tax if, before you reach age 591/2, the distribution method under the equal periodic payment exception changes (for reasons other than your death or disability). The tax applies if the method changes from the method requiring equal payments to a method that would not have qualified for the exception to the tax. The recapture tax applies to the first tax year to which the change applies. The amount of tax is the amount that would have been imposed had the exception not applied, plus interest for the deferral period.
You may have to pay the recapture tax if you do not receive the payments for at least 5 years under a method that qualifies for the exception. You may have to pay it even if you modify your method of distribution after you reach age 591/2. In that case, the tax applies only to payments distributed before you reach age 591/2.
Report the recapture tax and interest on line 4 of Form 5329. Attach an explanation to the form. Do not write the explanation next to the line or enter any amount for the recapture on lines 1 or 3 of the form.
taxmap/pubs/p590-012.htm#en_us_publink1000230918
One-time switch.(p53)
If you are receiving a series of substantially equal periodic payments, you can make a one-time switch to the required minimum distribution method at any time without incurring the additional tax. Once a change is made, you must follow the required minimum distribution method in all subsequent years.
taxmap/pubs/p590-012.htm#en_us_publink1000230919

Higher education expenses.(p53)

rule
Even if you are under age 591/2, if you paid expenses for higher education during the year, part (or all) of any distribution may not be subject to the 10% additional tax. The part not subject to the tax is generally the amount that is not more than the qualified higher education expenses (defined later) for the year for education furnished at an eligible educational institution (defined later). The education must be for you, your spouse, or the children or grandchildren of you or your spouse.
When determining the amount of the distribution that is not subject to the 10% additional tax, include qualified higher education expenses paid with any of the following funds. Do not include expenses paid with any of the following funds.
taxmap/pubs/p590-012.htm#en_us_publink1000230920
Qualified higher education expenses.(p54)
Qualified higher education expenses are tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a student at an eligible educational institution. They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. In addition, if the individual is at least a half-time student, room and board are qualified higher education expenses.
taxmap/pubs/p590-012.htm#en_us_publink1000230921
Eligible educational institution.(p54)
This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in the student aid programs administered by the U.S. Department of Education. It includes virtually all accredited, public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution.
taxmap/pubs/p590-012.htm#en_us_publink1000230922

First home.(p54)

rule
Even if you are under age 591/2, you do not have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home. To qualify for treatment as a first-time homebuyer distribution, the distribution must meet all the following requirements.
  1. It must be used to pay qualified acquisition costs (defined later) before the close of the 120th day after the day you received it.
  2. It must be used to pay qualified acquisition costs for the main home of a first-time homebuyer (defined later) who is any of the following.
    1. Yourself.
    2. Your spouse.
    3. Your or your spouse's child.
    4. Your or your spouse's grandchild.
    5. Your or your spouse's parent or other ancestor.
  3. When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions cannot be more than $10,000.
Deposit
If both you and your spouse are first-time homebuyers (defined later), each of you can receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.
taxmap/pubs/p590-012.htm#en_us_publink1000230924
Qualified acquisition costs.(p54)
Qualified acquisition costs include the following items.
taxmap/pubs/p590-012.htm#en_us_publink1000230925
First-time homebuyer.(p54)
Generally, you are a first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.
taxmap/pubs/p590-012.htm#en_us_publink1000230926
Date of acquisition.(p54)
The date of acquisition is the date that:
Deposit
If you received a distribution to buy, build, or rebuild a first home and the purchase or construction was canceled or delayed, you generally can contribute the amount of the distribution to an IRA within 120 days of the distribution. This contribution is treated as a rollover contribution to the IRA.
taxmap/pubs/p590-012.htm#en_us_publink1000230927

Qualified reservist distributions.(p54)

rule
A qualified reservist distribution is not subject to the additional tax on early distributions.
taxmap/pubs/p590-012.htm#en_us_publink1000230928
Definition.(p54)
A distribution you receive is a qualified reservist distribution if the following requirements are met.
taxmap/pubs/p590-012.htm#en_us_publink1000230929
Reserve component.(p54)
The term "reserve component" means the:
taxmap/pubs/p590-012.htm#en_us_publink1000230930

Additional 10% tax(p54)

rule
The additional tax on early distributions is 10% of the amount of the early 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.
Use Form 5329 to figure the tax. See the discussion of Form 5329, later, under Reporting Additional Taxes for information on filing the form.
taxmap/pubs/p590-012.htm#en_us_publink1000230932

Example.(p54)

Tom Jones, who is 35 years old, receives a $3,000 distribution from his traditional IRA account. Tom does not meet any of the exceptions to the 10% additional tax, so the $3,000 is an early distribution. Tom never made any nondeductible contributions to his IRA. He must include the $3,000 in his gross income for the year of the distribution and pay income tax on it. Tom must also pay an additional tax of $300 (10% × $3,000). He files Form 5329. See the filled-in Form 5329.
taxmap/pubs/p590-012.htm#en_us_publink1000230933
EIC
Early distributions of funds from a SIMPLE retirement account made within 2 years of beginning participation in the SIMPLE are subject to a 25%, rather than a 10%, early distributions tax.
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Nondeductible contributions.(p55)

rule
The tax on early distributions does not apply to the part of a distribution that represents a return of your nondeductible contributions (basis).
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Excess Accumulations 
(Insufficient Distributions)(p55)

rule
You cannot keep amounts in your traditional IRA indefinitely. Generally, you must begin receiving distributions by April 1 of the year following the year in which you reach age 701/2. The required minimum distribution for any year after the year in which you reach age 701/2 must be made by December 31 of that later year.
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Tax on excess.(p55)
If distributions are less than the required minimum distribution for the year, discussed earlier under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required.
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Reporting the tax.(p55)

rule
Use Form 5329 to report the tax on excess accumulations. See the discussion of Form 5329, later, under Reporting Additional Taxes, for more information on filing the form.
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Request to waive the tax.(p55)

rule
If the excess accumulation is due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can request that the tax be waived. If you believe you qualify for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax in the Instructions for Form 5329.
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Exemption from tax.(p55)

rule
If you are unable to take required distributions because you have a traditional IRA invested in a contract issued by an insurance company that is in state insurer delinquency proceedings, the 50% excise tax does not apply if the conditions and requirements of Revenue Procedure 92-10 are satisfied. Those conditions and requirements are summarized below. Revenue Procedure 92-10 is in Cumulative Bulletin 1992-1. To obtain a copy of this revenue procedure, see Mail in chapter 6. You can also read the revenue procedure at most IRS offices and at many public libraries.
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Conditions.(p55)
To qualify for exemption from the tax, the assets in your traditional IRA must include an affected investment. Also, the amount of your required distribution must be determined as discussed earlier under When Must You Withdraw Assets (Required Minimum Distributions).
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Affected investment defined.(p55)
Affected investment means an annuity contract or a guaranteed investment contract (with an insurance company) for which payments under the terms of the contract have been reduced or suspended because of state insurer delinquency proceedings against the contracting insurance company.
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Requirements.(p55)
If your traditional IRA (or IRAs) includes assets other than your affected investment, all traditional IRA assets, including the available portion of your affected investment, must be used to satisfy as much as possible of your IRA distribution requirement. If the affected investment is the only asset in your IRA, as much of the required distribution as possible must come from the available portion, if any, of your affected investment.
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Available portion.(p55)
The available portion of your affected investment is the amount of payments remaining after they have been reduced or suspended because of state insurer delinquency proceedings.
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Make up of shortfall in distribution.(p55)
If the payments to you under the contract increase because all or part of the reduction or suspension is canceled, you must make up the amount of any shortfall in a prior distribution because of the proceedings. You make up (reduce or eliminate) the shortfall with the increased payments you receive.
You must make up the shortfall by December 31 of the calendar year following the year that you receive increased payments.
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Reporting Additional Taxes(p55)

rule
Generally, you must use Form 5329 to report the tax on excess contributions, early distributions, and excess accumulations. If you must file Form 5329, you cannot use Form 1040A, Form 1040EZ, or Form 1040NR-EZ.
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Filing a tax return.(p55)

rule
If you must file an individual income tax return, complete Form 5329 and attach it to your Form 1040 or Form 1040NR. Enter the total additional taxes due on Form 1040, line 58, or on Form 1040NR, line 56.
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Not filing a tax return.(p55)

rule
If you do not have to file a return, but do have to pay one of the additional taxes mentioned earlier, file the completed Form 5329 with the IRS at the time and place you would have filed Form 1040 or Form 1040NR. Be sure to include your address on page 1 and your signature and date on page 2. Enclose, but do not attach, a check or money order payable to the United States Treasury for the tax you owe, as shown on Form 5329. Write your social security number and "2010 Form 5329" on your check or money order.
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Form 5329 not required.(p55)
You do not have to use Form 5329 if either of the following situations exist.