Amounts that you withdraw from your IRA (distributions) before you reach age 59 ½ are subject to a 10% early distribution penalty unless you qualify for an exception, including a qualified disability.
You should check the Disability option on your IRA distribution form only if your distribution is made from a traditional IRA while you are under age 59 ½, and you are disabled as defined by the tax code. Disability, for this purpose, is the inability to substantially perform your job due to a medically determined physical or mental impairment that could affect you long-term, indefinitely or cause death. The tax code also provides that:
- A short-term illness is not considered to be a disability.
- Being disabled for the purpose of some benefits doesn’t necessarily make you eligible for the disability exception, for early distribution.
- The disability diagnosis must be provided by an acceptable medical source (AMS), including a licensed physician or a licensed or certified psychologist.
In order to request this exception, you should upload this diagnosis documentation to your IRA Dashboard's secure shared files folder in addition to your completed Guideline IRA Distribution form.
If your traditional IRA distribution is taken while you are disabled, Code 3 is input in Box 7 of the Form 1099-R issued to report your distribution due to disability. The IRS may require proof of your disability if your distribution is reported on Form 1099-R as well.