Tax Penalty For Premature IRA Distributions
When an IRA account holder takes a premature distribution before age 59 1/2, there is generally a 10% tax penalty that is assessed.
This 10% penalty applies to the taxable portion of a Traditional IRA distribution taken before the IRA owner reaches the eligible age. The penalty is computed using Form 5329. However, certain exceptions provide relief from the penalty. See chapter 4.8 for the various exceptions.
Required Minimum Distributions
A Traditional IRA is subject to the required minimum distribution rules for qualified plans. In response to the Covid pandemic, the CARES Act (Act Sec 2203(a)) modifies IRC Sec 401(a)(9) and waives the 2020 required minimum distributions (RMDs) from defined contribution plans, such as 401(k)s, and IRAs. See chapter 4.17 for the details on RMDs and the waiver.