Usually, thrift savings plans, or TSPs, shouldn't be withdrawn until you reach retirement because of the early withdrawal penalties that apply if you're under 59 1/2 years old. However, if you're starting a business and need funds, you might take a distribution from your TSP just to make ends meet. Taking a TSP distribution because of business expenses doesn't qualify for an exemption, so you'll have to pay an extra 10 percent penalty on the taxable portion of the distribution.
Step 1
Report the taxable portion of the TSP distribution on line 16b of Form 1040. The taxable portion of the distribution is reported in box 2a of Form 1099-R. This amount adds to your taxable income for the year.
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Step 2
Report the entire TSP distribution as a non-taxable pension and annuity distribution on line 16a of Form 1040 if any of the distribution is non-taxable. The total amount of your TSP distribution is found in box 1 of your Form 1099-R. If all of the distribution is taxable, do not report any amount on line 16a.
Step 3
Include any federal income tax withholding, found in box 4 of your Form 1099-R, in your income taxes withheld on line 62 of Form 1040.
Step 4
Complete Form 5329 to figure your early withdrawal penalty if you are under 59 1/2 years old when you take the distribution. For example, if you are 40 and $6,000 of your distribution is taxable, you'll owe a $600 penalty. Report the penalty you owe on line 58 of Form 1040.
Things You'll Need
IRS Form 1099-R
IRS Form 1040
IRS Form 5329
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