Determine the status of your IRA withdrawals and report them with your taxes using the correct forms. IRA withdrawals are included in your taxable income and may be subject to additional taxes if the distribution was initiated before the age of 59.5.Continue Reading
You must first confirm your age and the age of the IRA to determine whether the withdrawal is a regular or early distribution. If you were over the age of 59.5 and the IRA is five years or older, the withdrawal is classified as a regular distribution and must be reported as regular income on your 1040. If the withdrawal was initiated before these benchmarks, it is classified as an early distribution and must be recorded as such on IRS Forms 8606 and 5329. Early distributions are subject to a 10 percent additional tax unless you qualify for one of the exceptions outlined in Publication 590-B.
For normal distributions, total the withdrawal amounts in box 1 of the 1099-R form (procured from your financial institution). Next, add the withdrawals subject to taxation in Box 2. Finally, record the figure from Box 1 on line 15a and the figure from Box 2 on line 15b.
For early distributions, complete IRS Form 8606 to determine whether or not your withdrawals are exempt from additional taxes. Attach Form 8606 to your return and then complete IRS Form 5329 (Additional Taxes on Qualified Plans) if your early withdrawal amounts exceeded your contributions. Attach Form 5329 to your return to report your early withdrawals.