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Penalty Tax

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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.


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The annuity exception requires that taxpayers use a method approved by the IRS and receive at least one distribution annually If the annual payments are modified (for any reason other than death or disability) before age 59 1/2 or within a five-year period that begins with the date of the first payment before age 59 1/2, the 10% penalty tax is applied to distributions received before age 59 1/2 (IRC [section] 72(t)(4)).
Under current tax law, you can avoid the 10% penalty tax if you take "substantially equal periodic payments.
The message which the courts delivered in this case is that they will treat all cases of serial tax evasion as extremely serious leading to long periods of imprisonment irrespective of the taxpayer''s individual circumstances even where taxpayers have paid their penalty tax in full.
 
 
 
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