Taking money out early from your retirement plan may trigger an additional tax. Here are
seven things from the IRS that you should know about early withdrawals from retirement
plans:

1. An early withdrawal normally means taking money from your plan before you reach age 59½.
2. If you made a withdrawal from a plan last year, you must report the amount you withdrew
   to the IRS. You may have to pay income tax as well as an additional 10 percent tax on the
   amount you withdrew.
3. The additional 10 percent tax does not apply to nontaxable withdrawals. Nontaxable
   withdrawals include withdrawals of your cost to participate in the plan. Your cost includes
   contributions that you paid tax on before you put them into the plan.
4. A rollover is a type of nontaxable withdrawal. Generally, a rollover is a distribution to
   you of cash or other assets from one retirement plan that you contribute to another
   retirement plan. You usually have 60 days to complete a rollover to make it tax-free.
5. There are many exceptions to the additional 10 percent tax. Some of the exceptions for
   retirement plans are different from the rules for IRAs.
6. If you make an early withdrawal, you may need to file Form 5329, Additional Taxes on
   Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax
   return.
7. The rules for retirement plans can be complex. The fast, safe and free way to prepare and
   e-file your tax return is to use IRS Free File. Free File offers brand-name software or
   online fillable forms for free. Free File software will pick the right tax forms, do the
   math and help you get the tax benefits you’re due. No matter how you prepare your taxes,
   you should always file electronically with IRS e-file. More than 80 percent of taxpayers
   e-file for faster refunds or for easier electronic payment options.

More information on this topic is available on IRS.gov.

Additional IRS Resources:

• Tax Topic 557 – Additional Tax on Early Distributions from Traditional and ROTH IRAs
• Tax Topic 558 – Additional Tax on Early Distributions from Retirement Plans, Other Than
  IRAs
• IRA FAQs – Distributions (Withdrawals)
• Publication 590, Individual Retirement Arrangements (IRAs)
• Publication 575, Pension and Annuity Income
• 1040 Central

IRS Tax Tip 2014-34, March 17, 2014

If you are an independent contractor or run your own business, there are a few basic things to know when it comes to your federal tax return. Here are six tips you should know about income from self-employment:

1. Self-employment income can include income you received for part-time work. This is in addition to income from your regular job.
2. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
3. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Make sure to file the schedule with your tax return.
4. You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You may be charged a penalty if you do not pay enough taxes throughout the year.
5. You can deduct some expenses you paid to run your trade or business. You can deduct most business expenses in full, but some must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
6. You can deduct business costs only if they are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Form 1040-ES, Estimated Tax for Individuals
• Publication 505, Tax Withholding and Estimated Tax
• Publication 334, Tax Guide for Small Business
• Publication 535, Business Expenses

IRS YouTube Videos:

• Estimated Tax Payments – English | Spanish | ASL

IRS Podcasts:

• Estimated Tax Payments – English | Spanish

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