Untitled Document

March 2026

The 10% Additional Tax and Terminally Ill IRA Owners

An IRA owner who is terminally ill does not owe the 10% additional tax. He or she must still pay the general tax which applies. IRS guidance as set forth in the 2025 Publication 590-B is that a person who is under the age of 59 1/2 who withdraws IRA funds does not owe the 10% additional tax if the distribution is received on or after the date a physician certifies in writing that the person is terminally ill. A person is considered terminally ill if a doctor certifies the person is expected to die in 84 months or less. The 84-month period commences on the date the doctor furnishes the certification.

The law permits a person to repay a distribution or a portion of a distribution made to the person while terminally ill. There is a 3-year repayment period. The normal 60-day rollover period does not apply.

The IRS requires a certification meet the following requirements:
• A statement that the individual’s illness or physical condition can be reasonably expected to result in death in 84 months or less after the date of certification.

• A narrative description of the evidence that was used to support the statement of illness or physical condition.

• It must include the name and contact information of the physician making the statement.

• The statement must include the date the physician examined the individual or reviewed the evidence provided by the individual, and the date that the physician signed the certification.

• The statement must include the signature of the physician making the statement, and an attestation from the physician that, by signing the form, the physician confirms that the physician composed the narrative description based on the physician’s examination of the individual or the physician’s review of the evidence provided by the individual.

However, it is not sufficient evidence for an employee who is a physician to certify the physician’s own terminal illness.

The IRA owner is NOT required to furnish the IRA custodian/trustee with a copy of the doctor’s certification. For Form 1099-R purposes the IRA custodian/trustee will report a reason code “1” in box 7. The IRA owner has the duty to complete Part I of Form 5329 and indicate that the 10% additional tax is not owed because he or she is terminally ill. Line 2 would be completed with “20” since that is the code which applies for terminally ill.