An individual must pay an early IRA withdrawal tax penalty of 10 percent if he is not over the age of 59 1/2 and does not meet the qualifications for the exceptions stated in Publication 590-B, according to the Internal Revenue Service. Form 1040 is used to determine the penalty.Continue Reading
Any withdrawal from an individual retirement arrangement must be added to the gross income reported on Form 1040 when the individual files his taxes, says the IRS. If the individual is below the age of 59 1/2, 10 percent of his gross income is penalized and added to the amount of taxes he owes. If the withdrawal originated from a Savings Incentive Match Plan for Employees IRA, or SIMPLE IRA, the penalty amount is 25 percent.
If the individual is over the age of 59 1/2 or meets one of the exceptions listed in Publication 590-B, the penalty is waived, claims the IRS. Such exceptions include outstanding medical bills, being disabled or withdrawing an amount that is lower than the individual's college tuition debt.
In rare cases, a divorce may count as an exception to the penalty, according to the IRS. In order for a divorce to qualify as an exception, the interest from the IRA must be transferred to the individual's spouse under a divorce instrument.Learn more about Financial Planning