IRS Publication 590-B

What Is IRS Publication 590-B?

IRS Publication 590-B explains the tax implications of withdrawing money from any type of individual retirement account (IRA) before or after retirement. It indicates when you can't withdraw money without paying a penalty and when you must withdraw money.

The publication incorporates three chapters, several appendices, and worksheets to assist the taxpayer. Publication 590-A covers the tax rules for contributing to retirement accounts.

Understanding IRS Publication 590-B

There are several types of IRAs, including the traditional IRA and the Roth IRA, the SEP, and the SIMPLE IRA. But the big qualification is between the traditional and the Roth IRA:

A traditional IRA permits a taxpayer to contribute pre-tax earnings up to a certain amount each year. The wage-earner gets an immediate tax break, and taxes on the amount paid into the account are deferred until the taxpayer withdraws money.
A Roth IRA allows a taxpayer to contribute present tax earnings up on a certain amount each year. The wage-earner pays the income taxes upfront, so withdrawals taken after retirement won't be taxed.

An IRA distribution for higher education expenses or a first-time home purchase isn't subject to the 10% early withdrawal penalty.

IRS Publication 590-B is organized to explain the different tax implications of these two types of IRA accounts:

Chapters 1 and 2 of IRS Publication 590-B explain all the rules for the traditional IRA and the Roth IRA, separately. It covers when you can withdraw money and at what age you must withdraw money. It also incorporates penalties for early withdrawals from traditional IRAs.
Chapter 3 covers permitted early withdrawals used to pay for damage caused by natural disasters. These exemptions in 2021 were extended exclusively to individuals with losses attributed to four 2017 disasters, including Hurricane Harvey, Hurricane Irma, Hurricane Maria, and the California out of control fires. Also, in 2020 the IRS presented Coronavirus-related distributions. All of these distributions require repayment of the money to avoid a penalty down the line.
A basic section incorporates a table clarifying the differences between traditional and Roth IRAs, rules for required distributions, taxation of these accounts, and regulations for filing Form 8606. This is the form that must be documented to report distributions from any type of IRA.
Chapter 4 furnishes general information on finding support with tax-related issues.
Appendix A will be a worksheet for deciding your required least distribution, and Appendix B contains a life expectancy table expected to calculate suggested least distributions.

Penalties and Exemptions

Watch out for the penalties detailed in Publication 590-B, and the exemptions for those penalties. For example, most early distributions trigger a 10% penalty. The penalty increases to 25% in the event that money is withdrawn during the first two years of participation in a SIMPLE IRA. In any case, a withdrawal for qualified higher education expenses or first-time home purchase isn't subject to the penalty.

Different Publications

The IRS has various publications explaining the intricate details of qualified retirement plans.

On the off chance that you run a small business or work for one, you may be keen on IRS Publication 560: Retirement Plans for Small Business.
Another IRS publication, Tax Information for Retirement Plans, has broad information on saving for retirement and retirement plan administration.
An IRS FAQs page contains brief information about the various types of IRAs and their tax implications.

Features

In the event that you have a traditional IRA, see Chapter 1.
In the event that you have a Roth IRA, see Chapter 2.
IRS Publication 590-B calculates the taxes you'll owe when you withdraw money from any type of IRA account.