What is IRS Publication 590-B: Distribution from IRAs
IRS Publication 590-B, published by the Internal Revenue Service (IRS), specifies rules for taking distributions from traditional and Roth Individual Retirement Arrangements, (IRAs). The term individual retirement arrangement is a broad term and represents a wide variety of IRA account types. This publication includes three chapters, several appendices, and worksheets to assist the taxpayer. Publication 590-A covers contributions to retirement accounts.
BREAKING DOWN IRS Publication 590-B: Distribution from IRAs
IRS Publication 590-B is divided into sections to provide information about distributions from Individual Retirement Arrangements. Funds contributed to an IRA account may not remain there indefinitely. Each specific type of Individual Retirement Arrangement contains its own set of guidelines. Taxpayers should be careful to refer to instructions for their particular account type as the IRS regulates the timing and of distribution of funds from these accounts.
An introductory section includes a table highlighting the differences between traditional and Roth IRAs, rules for required distributions, taxation of these accounts, and regulations for filing Form 8606. Form 8606 is used to report distributions from Roth IRAs, Roth IRA conversions, and distributions from traditional, SEP, or SIMPLE IRAs after making nondeductible IRA contributions.
- Chapter 1 covers traditional IRA rules and provisions such as how to handle an inherited IRA, withdrawal of assets, taxation of distributions, and required minimum distribution (RMD) guidelines.
- Chapter 2 of the publication pertains to Roth IRAs. This section explains when distributions may be taken and the tax penalties for early withdrawal of non-qualified funds.
- Chapter 3 relates to disaster-related relief and details disaster-related distributions and repayment requirements, including the repayment of distributions for the purchase or the construction of a primary home after a disaster.
- Chapter 4 provides information to help the taxpayer with tax-related issues such as filing a tax return, obtaining a tax return transcript, and checking on the status of a tax refund.
Worksheet 1-1 allows you to calculate the taxable part of a traditional IRA distribution. Appendix A includes a worksheet for determining the required minimum distribution, and Appendix B contains the life expectancy table needed to calculate RMDs.
Penalties for Early or Late IRA Distributions
Publication 590-B contains detailed information on when the IRS may impose penalties or additional taxes on IRA distributions. For example, the owner of a Roth IRA may withdraw funds after age 59½ without penalty. However, the IRS will impose penalties for funds taken from a traditional IRA before the age of 70½.
Some early distributions are exempt from the 10% premature withdrawal penalty. For example, early distributions used for qualified higher education expenses are not subject to the penalty. Also, there is no penalty for IRA withdrawals up to $10,000 for the first-time purchase of a home. Furthermore, funds withdrawn for disaster-related repairs may be exempt but require repayment.
The IRS sets 70½ as the age when required minimum distributions (RMD) from a traditional IRA must begin. These distributions must continue each year until the fund is depleted. Money removed in one year does not count towards the requirements for the following year's distribution.
Taxpayers looking for information on Simplified Employee Pension Plans (SEP), 401(k) plans, and SIMPLE IRA should read IRS Publication 560 Retirement Plans for Small Businesses. These plans have distribution rules that are similar to traditional IRA accounts, but also have unique requirements. Information for distributions from Coverdell Education Savings Accounts is contained in IRS Publication 970.