A 403(b) is a retirement plan for those working in the public school system and tax-exempt non-profit firms. Contributions from your salary are included before you figure your income tax, so it is a deduction. Like any IRA, it begins to distribute automatically when you reach 70 1/2 years of age, but you can elect to draw from it when you turn 59 1/2 years. Anything prior to 59 1/2 is considered an early withdrawal, and is subject to an additional 10-percent tax. There are some ways to draw on a 403(b) early without paying the penalty.
1. Gather your financial records. Drawing on the account before you reach 59 1/2 will lead to the 10-percent penalty. The IRS will waive that under specific conditions. You could, of course, just begin taking money out, but you will have to pay the penalty. The conditions under which the IRS permits the waiver of the penalty depends on certain hardships. Regardless of the route you choose, you need your financial records to send to them. You must, in other words, prove that you qualify for the waiver of the tax penalty.
2. Check your yearly medical costs. If your insurance costs are higher than your present medical insurance costs, you can deduct early. In this case, you have to figure how much you would be given if you could draw on the 403(b) today. If your insurance costs are higher than your present medical insurance costs, you can begin withdrawing without a penalty.
3. Send the IRS a copy of your doctor's report if you are disabled or severely injured. If you are disabled and cannot work, sending the IRS proof of this will cause the 10 percent penalty to be waived. You could begin drawing on the 403(b) immediately.
4. Mail the IRS proof of any unreimbursed medical expenses. If these expenses in a given year are above 7 1/2 percent of your adjusted gross income, then the penalty will be waived.
5. Deliver to the IRS a copy of your spouse's death certificate. If your spouse was making regularly contributions to a 403(b) plan, and he or she dies, you can begin receiving distributions from the account immediately, even if you are under 59 1/2 years of age.
6. Pay all your back taxes. The 403(b) can be seized by the IRS for non-payment of taxes. According to section 72(t) of the Internal Revenue Code, if your account is levied by the IRS for non-payment, this is a forced distribution of the amount. In that case, the 10-percent tax is not applied.