Broker Check

The IRS Is Unforgiving with a 72t Distribution Penalty

Once 72(t) payments start, they cannot be stopped or modified for any reason. If payments are modified in any way other than due to death or disability of the IRA owner, a 10% Federal Income Tax penalty plus interest will be retroactively applied to the payments beginning with the first year of the distributions/payments.

This means that if you are in year #4 of taking 72(t) payments and you violate the rules, you will have to pay this 10% tax penalty (and interest) on the entire amount you have withdrawn over the first (3) years and not just on the amount you violated in year #4 of your 72(t) commitment.

72t free consultation button

Comments are closed.