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

8.12 Penalty for Traditional IRA Withdrawals Before Age 59½

You have to pay a 10% penalty in addition to regular tax if you take a distribution from a traditional IRA before you are age 59½, unless you qualify for an exception specified in the tax law. There is no general exception for financial hardship. Although you may be forced in tough economic times to tap your IRA to cover living expenses, or you face a family emergency, you will be able to avoid the early distribution penalty only if you fit within one of the designated penalty exceptions, such as for disability, paying substantial medical expenses, or higher education expenses.

Here is the list of allowable penalty exceptions: (1) you take the distribution because you are totally disabled, (2) you pay medical expenses exceeding 7.5% of adjusted gross income, (3) you receive unemployment compensation for at least 12 consecutive weeks and pay medical insurance premiums, (4) you pay qualified higher education expenses, (5) the distribution is $10,000 or less and used for qualified first-time home-buyer expenses, (6) you receive a qualified reservist distribution, (7) the distribution is one of a series of payments being made under one of several annuity-type methods, (8) the distributions are made to you as a beneficiary of a deceased IRA owner, or (9) the distribution was due to an IRS levy on your IRA. These exceptions are further discussed below.

Also note that a qualifying rollover (8.10) of an IRA distribution is not ...