A type of payment made by a corporation to its shareholders during its partial or full liquidation.
For the most part, such a distribution is made from the company's capital base, and as a return of capital, is typically not taxable for shareholders.
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Report the IRA liquidation when you file your tax return.
If the account you liquidated was a traditional IRA, report the entire amount on IRS Form 1040.
Because your contributions are always made with after-tax dollars (you already paid income tax on that money), you can withdraw your contributions before retirement without having to fork over cash for taxes or penalties. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes.
The penalty for early withdrawal of earnings, except under certain specified conditions, is 10 percent of the earnings that you withdrew.
The Internal Revenue Service discourages their use for most other purposes by imposing a 10 percent penalty on withdrawals before age 59 1/2.This penalty applies only to distributions of earnings from Roth IRAs.If the IRS has placed a levy against your IRA, you can use the IRA funds to satisfy the levy without incurring any penalty.Otherwise, the funds will likely be disbursed via mailed check.Allow an additional seven to 10 mailing days to receive the check.