Do you have a Traditional IRA and want to take a distribution before you are 59 1/2?
If you have a traditional IRA and take a distribution before age 59 ½, the amount is subject to income tax and you’ll generally owe an additional 10% early withdrawal penalty tax. However, there are several exceptions when you can avoid the 10% penalty. In one case, a taxpayer who hadn’t reached age 59 ½ took a $7,800 distribution from his IRA. He didn’t report it on his tax return or pay the 10% penalty. He also didn’t roll it over into another IRA or retirement account. The U.S. Tax Court stated that he made “frivolous arguments” that didn’t prove that any exception to the 10% penalty applied. Therefore, the court ruled he was liable for the penalty. (TC Memo 2020-151)