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 ?
Even if the distribution is not "qualified," it may escape the usual 10% early withdrawal penalty if it satisfies one of the exceptions for traditional IRAs, which are medical insurance premiums, educational expenses and first-time homebuyer expenses.
It concluded that he had "initiated, received, and controlled the withdrawals." The Court also found Czepiel liable for the 10% early withdrawal penalty.
Withdrawals made during this phase from any qualified retirement plan, including IRAs, are subject to a non-deductible 10% early withdrawal penalty. This is in addition to the regular income tax that must be paid whenever there are withdrawals from qualified plans.
* If a distribution is taken from a qualified plan before age 55, there will be a 10% early withdrawal penalty, but only on its cost basis.
The 10% IRA withdrawal penalty does not apply to converted funds, but any withdrawal the taxpayer takes to pay the taxes due at conversion will be subject to the penalty.
Second, the IRA exceptions to the 10% premature withdrawal penalty tax do not include early retirement, medical expenses, and ESOP distributions.
Nonqualifying distributions from a Roth IRA are not exempt from the early withdrawal penalty. The early withdrawal penalty is 10% of the distribution required to be included in the taxpayer's gross income.
Although income tax will be owed on the amount withdrawn, the taxpayer will not be subject to the 10% early withdrawal penalty when amounts are withdrawn before the account holder reaches age 59 1/2.
Dwyer reported the IRA withdrawal on his tax return but did not pay the 10% premature withdrawal penalty.
72(t)(1) early withdrawal penalty when distributed from the IRA; however, the earnings thereon will be subject to that penalty when distributed from the IRA.