January 2026
The IRS issued Notice 2024-55 on June 20, 2024. It provides guidance on the subject of withdrawing funds from an IRA after there has been domestic abuse.
An individual who withdraws funds on or after January 1, 2024 from his or her IRA on account of a domestic abuse incident will not owe the 10% additional tax. The amount withdrawn is to be included in income and the applicable taxes paid, but the 10% additional tax is not owed. SECURE Act 2.0 created this new exception to the 10% additional tax. An IRA representative might suggest to an IRA accountholder in this situation that they should discuss this topic with their tax adviser.
Whereas the distribution amount was a modest $1,000 for a financial personal expense it is a substantial amount of $10,000 for a domestic abuse situation. This $10,000 is indexed for inflation.
Domestic abuse is defined very broadly in the law as physical, psychological, sexual, emotional, or economic abuse. There is domestic abuse if there is an effort to control, isolate, humiliate or intimidate the IRA accountholder, the IRA accountholder’s child or other family member.
This new exception applies to distributions from IRAs and many types of employer sponsored plans, but not to distributions from a defined benefit plan or a plan subject to the joint and survivor rules. This article only discusses the topic from the IRA viewpoint.
The individual has the responsibility of determining that he or she has met the requirements to have a distribution on account of a domestic abuse incident. Each situation will depend upon the facts and circumstances. The definition is very broad.
A domestic abuse victim distribution is any distribution from an IRA during the one-year period beginning on any date the IRA accountholder is a victim of domestic abuse by a spouse or a domestic partner. The IRS does not define who is a domestic partner.
The individual will certify on an IRA distribution form that their distribution qualifies as a domestic abuse distribution. An IRA custodian/trustee is allowed to rely on this certification.
The individual who is under age 59 1/2 will need to prepare his or her tax return accordingly. The IRA custodian is to use Code 1 in box 7 of the Form 1099-R. The individual will need to complete Form 5329 to indicate he or she does not owe the 10% additional tax because he or she was qualified to use the domestic abuse exception.
Unlike with the emergency distribution there are no rules that limit the individual from having multiple distributions on account of multiple acts of domestic abuse.
An IRA custodian/trustee is able to rely on the IRA accountholder’s certification that she or he is withdrawing funds because of a domestic abuse event. CWF will be creating or revising its IRA distribution form so the IRA accountholder makes this certification.
The maximum distribution amount which may qualify as a personal emergency is $10,000 except if the account balance is less than $10,000 then it is the account balance.
A person who receives a personal emergency expense distribution has the right to repay or rollover this distribution within 3 years. The repayment amount, of course, is limited to the amount originally distributed. The 3-year repayment period begins on the day after the distribution was received. An individual is permitted to repay only a portion of the original distribution.
If the person timely repays the previous distribution, then that amount which was originally taxable becomes non-taxable. All other tax matters being equal, the individual would be entitled to a refund if he or she makes a timely claim for a refund.
An IRA custodian/trustee should be ready accept such a repayment or rollover whether the original distribution was from an IRA or from an employer sponsored plan. CWF will be creating a new rollover or repayment certification form or revising an existing form.
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