Penalty tax

(redirected from Withdrawal Penalty)

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.
References in periodicals archive ?
Avoid higher early withdrawal penalty and rollover prohibition during employee's first two years of participation.
Dwyer reported the IRA withdrawal on his tax return but did not pay the 10% premature withdrawal penalty.
Noting that earnings on excess amounts are not included in the definition of excess amounts, the IRS ruled the excess $14,000 would not be subject to the early withdrawal penalty exercise tax under Sec.
These variables include the taxability of annuity earnings upon distribution, the 10% premature withdrawal penalty for distributions before age 59 1/2 and contract fees.
For example, an individual may want to begin distributions before attaining age 70 1/2 in order to reduce accumulate benefits, or possibly before age 59 1/2 without incurring any early withdrawal penalty (as long as the individual meets certain requirements and the distributions are made over his life expectancy at the time).
3%) exceeds the early withdrawal penalty (10%), an employer can put the same bonus dollars in an employee's pocket by contributing the bonus to an SEP and allowing the employee to immediately withdraw the contribution (if he desires) while saving the employer-side FICA.
Clients who are retiring but have not yet reached age 59 A1/2 (so that the early withdrawal penalty would continue to apply if he or she transferred the assets to an IRA) may benefit from the NUA strategy by transferring the shares into a taxable account and gaining access to the proceeds of the shares once they are actually sold.
3823, the Disaster Tax Relief and Airport and Airway Extension Act, which allows individuals to access their 401-K retirement funds to pay for recovery and waives the 10 percent early withdrawal penalty for qualified hurricane relief distributions.