How to Make an Early Exempt IRA Withdrawal
- 1). Enter the total amount of your IRA withdrawal on Line 1 of Form 5329.
- 2). Enter the amount of the withdrawal that is eligible to be withdrawn penalty-free on Line 2. Write the number that corresponds to your reason for the early withdrawal in the space provided to the left of Line 2. For example, if you were claiming an early withdrawal for medical expenses, you would write 05. You can find a complete list of reasons in the instructions for Form 5329, available online and from the IRS (see Resource).
- 3). Subtract Line 2 from Line 1, then write the result on Line 3. If your entire distribution is qualified, the number should be zero and you will not have to pay the 10 percent penalty for an unqualified early withdrawal.
- 4). Attach Form 5329 to your income tax return to document your early withdrawal.
- 5). Include your IRA distribution in your taxable income by writing the amount on Lines 15a and 15b of your Form 1040 or Form 1040 NR. Since the contributions were made with pretax dollars, you have to list the money as taxable income even if it is not subject to taxes.
