Generally, the same distribution (withdrawal) rules that apply to
traditional IRAs apply to SIMPLE IRAs. These rules are discussed in
Your employer cannot restrict you from taking distributions from a
Are Distributions Taxable?
Generally, 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,
Rollovers and Transfers Exception
Generally, rollovers and trustee-to-trustee transfers are not
To 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.
Additional Tax on Early Distributions
The 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%.
Also, 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.
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