Excess-Accumulation Penalty

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Excess-Accumulation Penalty

A 50% tax that one must pay if one neglects to take the required minimum distribution from one's IRA. The required minimum distribution is the portion of an IRA that must begin to be distributed to an annuitant by the age of 70.5 or the date of retirement, whichever comes later. The amount of the minimum required distribution is determined by the value of the IRA, the length of time the annuitant has contributed, and the amount of contributions. In any case, the excess accumulation penalty exists in order to prevent an IRA from becoming unfairly valuable during the annuitant's retirement. See also: Excise tax.
References in periodicals archive ?
Failure to Take Required Minimum Distributions and the Excess Accumulation Penalty
As is evident in Example 1, the tax imposed for missed RMDs, also known as the excess accumulation penalty, is one of the steepest penalties the Code imposes with regard to retirement accounts.
The 50% excess accumulation penalty applies not only to IRA and qualified plan account owners, but also to inherited IRA and qualified plan beneficiaries.
Consistent with the application of many other penalties, Congress provided a mechanism to waive the excess accumulation penalty.
A taxpayer who failed to take an RMD and is subject to the excess accumulation penalty should consult with an adviser to determine whether to file a request for a waiver.