Question

Tax question:

IRA or retirement plan distribution with disability exception - exception applied to 10% penalty only and individual must still be responsible for income taxes of distributed amount, correct?

Answer 1

Yes ....What you said is absolutely correct. Irs provides exception to the total and permanently disabled persons from the 10%penalty on early distributions from retirement plans.

Usually, when any person who withdraws before age of 59.5 yrs...he has to include the distributions in his total income and has to pay an additional amount of 10% penalty on the early distributions......but for the total and permanently disabled persons there is an exception from payment of 10% penalty ....but IRS is silent on the inclusion of distribution in taxable amount...hence no specific exclusion is given to it...Hence, the same should be included in total income and to be taxed.

Hope it helps,

Thank u.