J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

7.15 Penalty for Distributions Before Age 59½

A 10% penalty generally applies to taxable distributions made to you before you reach age 59½ from a qualified corporate or self-employed Keogh plan, qualified annuity plan, or tax-sheltered annuity plan, but there are several exceptions. For example, the penalty does not apply to distributions made to you after separation from service if the separation occurs during or after the year in which you reach age 55. A full list of exceptions is shown below.

If no exception applies, the penalty is 10% of the taxable distribution. If you make a tax-free rollover (7.7), the distribution is not taxable and not subject to the penalty. If a partial rollover is made, the part not rolled over is taxable and subject to the penalty.

A similar 10% penalty applies to IRA distributions before age 59½ (8.12). The penalty is 25% if a distribution before age 59½ is made from a SIMPLE IRA in the first two years of plan participation (8.18). There is a penalty for pre–age 59½ distributions from deferred annuities (7.23). The penalty generally does not apply to Section 457 plans of tax-exempt employers or state or local governments. However, if a direct transfer or rollover is made to a governmental Section 457 plan from a qualified plan, 403(b) annuity, or IRA, a later distribution from the Section 457 plan is subject to the penalty to the extent of the direct transfer or rollover.

There are a few differences between the penalty exceptions shown below for ...