What Is IRS Publication 590-B?

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What Is IRS Publication 590-B?

Let me tell you directly: IRS Publication 590-B is your go-to resource for understanding the tax implications of pulling money out of any individual retirement account (IRA), whether you're doing it before or after retirement. It lays out exactly when you can't withdraw without facing a penalty and when you absolutely must take money out.

Key Takeaways

This publication helps you figure out the taxes you'll owe on IRA withdrawals. If you're dealing with a traditional IRA, head straight to Chapter 1. For a Roth IRA, Chapter 2 is where you need to look. It has three chapters, several appendices, and worksheets to guide you through the process. Remember, Publication 590-A handles the rules for putting money into these accounts.

Understanding IRS Publication 590-B

You know there are different IRAs out there—traditional, Roth, SEP, SIMPLE—but the main split is between traditional and Roth. With a traditional IRA, you contribute pretax earnings up to a limit each year, get an immediate tax break, and defer taxes until withdrawal. A Roth IRA lets you put in post-tax earnings, pay taxes upfront, and then withdraw tax-free after retirement.

One important point: Distributions for higher education or a first-time home aren't hit with the 10% early withdrawal penalty. The publication is structured to cover tax rules for traditional IRAs in Chapter 1 and Roth in Chapter 2, including withdrawal ages, required distributions, and early withdrawal penalties.

Chapter 3 and Special Cases

Chapter 3 deals with early withdrawals for natural disaster damage. For 2023, under the SECURE 2.0 Act, you can take a qualified disaster recovery distribution up to $22,000 without penalty, spread the income over three years, but you'll need to repay it to avoid later penalties.

Introduction and Final Sections

The intro has a table comparing traditional and Roth IRAs, rules on required distributions, taxation, and how to file Form 8606 for reporting distributions. Later sections offer help on tax issues, Appendix A is a worksheet for your required minimum distribution (RMD), and Appendix B has life expectancy tables for RMD calculations.

Penalties and Exemptions in Publication 590-B

Pay attention to the penalties here. Most early distributions come with a 10% hit, jumping to 25% for SIMPLE IRAs in the first two years. But exemptions apply for things like qualified education expenses or first-time homes.

Other Useful IRS Publications

If you're in a small business, check Publication 560 for retirement plans. There's also a general Retirement Plans publication and an IRS FAQs page on IRA types and taxes.