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After the 2-year period, you can make tax-free rollovers from SIMPLE IRAs to other types of non-Roth IRAs, or to an employer-sponsored retirement plan. You can also roll over money into a Roth IRA after the 2-year period, but must include any untaxed money rolled over in your income.
Employer contributions to your SIMPLE IRA may be made in periodic contributions or in a single lump sum, as long as the contributions are deposited before the employers tax return filing deadline (including extensions). May I stop contributing to my SIMPLE IRA? Yes.
When should I establish and fund my SIMPLE IRA? New plans must be established by October 1 (if contributions will be made for that same year). Employer contributions must be made annually by the employers tax-filing deadline, including extensions.
SIMPLE IRA contributions are not subject to federal income tax withholding. However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Matching and nonelective contributions are not subject to these taxes.
You can use Form 5304-SIMPLEPDF or Form 5305-SIMPLEPDF to set up a SIMPLE IRA plan. Each form is a model Savings Incentive Match Plan for Employees (SIMPLE) plan document. Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions.
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The amount of the additional tax you have to pay increases from 10% to 25% if you make the withdrawal within 2 years from when you first participated in your employers SIMPLE IRA plan.
SIMPLE IRAs Have a Two-year Holding Period Plan participants typically can leave money in the plan, take a withdrawal, or roll over their savings. If your money has been in the SIMPLE IRA for two or more years, income taxes may be withheld, and a 10 percent penalty tax may be owed, depending on your age.
Use Form 5304-SIMPLE if you permit plan participants to select the financial institution to receive their SIMPLE IRA plan contributions. Use Form 5305-SIMPLE if you require all contributions under the SIMPLE IRA plan to be initially deposited at a financial institution you designate.

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