Our society has changed over the years. Divorce has become more common that it was years ago. More people have to deal with the ramifications of QDROs or Qualified Domestic Relations Orders. This article is in answer to the question ” Will You Receive A 10% Penalty If You Use Money From A QDRO Prior To The Age Of 59 1/2?”. We have also included links to additional resources below.
I did receive a lump sum of money from a QDRO. They deducted 20% Fed & State tax. I am going to file my income 2009 income tax. Do I have to pay 10% penalty on this also?
According to IRS Site if judge order QDRO then I don’t have to pay 10% early withdraw penalty. Is this true?
“Retirement Topics – Tax on Early Distributions
Generally, the amounts an individual withdraws from his or her IRA or other qualified retirement plan before reaching age 59½ are called ”early” or ”premature” distributions. Individuals must pay an additional 10% early withdrawal tax and report the amount to the IRS for any early distributions, unless an exception applies.
Exceptions: There are several exceptions to the age 59½ rule. Even if individuals receive a distribution before they are age 59½, they may not have to pay the 10% additional tax if they are in one of the following situations.
* They have unreimbursed medical expenses that are more than 7.5% of their adjusted gross income.
* They are disabled.
*The distributions are not more than their qualified higher education expenses (IRA only).
* The distribution is made to an alternate payee under a QDRO
If you roll it over you pay nothing otherwise it is like any other early withdrawal.