Penalty tax

(redirected from Penalty of Early Withdrawal of Savings)

Penalty tax

A federal tax that can be applied if a plan holder does not meet certain requirements when making withdrawals from a tax-advantaged retirement plan (for instance, if the plan holder has not reached age 59-1/2). This penalty tax is owed in addition to any income taxes due.

Penalty Tax

An excise tax imposed upon an unauthorized withdrawal from a retirement account, such as a 401(k) or an IRA. Most commonly, a penalty tax is assessed when one makes a withdrawal before the age of 59 1/2. See also: Hardship withdrawal.