Publication 590
taxmap/pubs/p590-022.htm#en_us_publink1000231135Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. These rules are discussed in
chapter 1.
Your employer cannot restrict you from taking distributions from a SIMPLE IRA.
taxmap/pubs/p590-022.htm#en_us_publink1000231136Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. If the distribution is an
early distribution
(discussed in chapter 1), it may be subject to the additional tax on early
distributions. See
Additional Tax on Early Distributions, later.
taxmap/pubs/p590-022.htm#en_us_publink1000231138Generally, rollovers and trustee-to-trustee transfers are not taxable distributions.
taxmap/pubs/p590-022.htm#en_us_publink1000231139To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE
IRA.
After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457
plan).
taxmap/pubs/p590-022.htm#en_us_publink1000231140The
additional tax
on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. If a
distribution is an early distribution and occurs during the 2-year period
following the date on which you first participated in your employer's SIMPLE
plan, the additional tax on early distributions is increased from 10% to 25%.
If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed.